On January 1, 2022, Pronto Company acquired 80 percent of Speedy Inc.'s voting stock for $7,900,000. The fair value of the 20 percent noncontrolling interest was $1,700,000. Speedy's net assets were reported at amounts approximating book value, but Pronto determined that Speedy had the following previously unreported intangible assets: • Developed technology, fair value $800,000, 5-year life • Favorable leases, fair value $400,000, 4-year life Speedy's shareholders' equity on January 1, 2022, was $4,000,000. It is now December 31, 2023 (two years later). Speedy reported net income of $320,000 in 2022. There are no impairments of identifiable intangibles or goodwill in 2022 or 2023. Pronto uses the complete equity method to report its investment in Speedy on its own books. Speedy's December ,2023, trial balance appears below.
On January 1, 2022, Pronto Company acquired 80 percent of Speedy Inc.'s voting stock for $7,900,000. The fair value of the 20 percent noncontrolling interest was $1,700,000. Speedy's net assets were reported at amounts approximating book value, but Pronto determined that Speedy had the following previously unreported intangible assets: • Developed technology, fair value $800,000, 5-year life • Favorable leases, fair value $400,000, 4-year life Speedy's shareholders' equity on January 1, 2022, was $4,000,000. It is now December 31, 2023 (two years later). Speedy reported net income of $320,000 in 2022. There are no impairments of identifiable intangibles or goodwill in 2022 or 2023. Pronto uses the complete equity method to report its investment in Speedy on its own books. Speedy's December ,2023, trial balance appears below.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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shobha
Transcribed Image Text:On January 1, 2022, Pronto Company acquired 80 percent of Speedy Inc.'s voting stock for $7,900,000. The fair value of the 20 percent noncontrolling interest was $1,700,000. Speedy's net assets were reported at
amounts approximating book value, but Pronto determined that Speedy had the following previously unreported intangible assets:
Developed technology, fair value $800,000, 5-year life
• Favorable leases, fair value $400,000, 4-year life
Speedy's shareholders' equity on January 1, 2022, was $4,000,000. It is now December 31, 2023 (two years later). Speedy reported net income of $320,000 in 2022. There are no impairments of identifiable
intangibles or goodwill in 2022 or 2023. Pronto uses the complete equity method to report its investment in Speedy on its own books. Speedy's December 31, 2023, trial balance appears below.
Current assets
Property and equipment, net
Liabilities
Capital stock
Retained earnings, January 1
Sales revenue
Cost of goods sold
Operating expenses
On the December 31, 2023, consolidated balance sheet, developed technology is reported at
Select one:
Dr (Cr)
$8,000,000
20,000,000
(23,200,000)
(800,000)
(3,520,000)
(28,000,000)
24,000,000
3,520,000
$0
a. $480,000
b. $800,000
c. $384,000
d. $640,000
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