On January 1, 2022, Pronto Company acquired all of Speedy Inc.'s voting stock for $12,000,000 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 $1,000,000, 5-year life • Favorable leases, fair value $500,000, 4-year life Speedy's shareholders' equity on January 1, 2022, was $5,000,000 It is now December 31, 2023 (two years later). Speedy reported net income of $400,000 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. Dr (Cr) $10,000,000 Current assets Property and equipment, net 25,000,000 Liabilities (29,000,000) Capital stock (1,000,000) Retained earnings, January 1 (4,400,000) (35,000,000) 30,000,000 4,400,000 Sales revenue Cost of goods sold Operating expenses On the December 31, 2023, consolidation working paper, eliminating entry (R) reduces Investment in Speedy by Select one: O a. $6,675,000 ✓ $0 Ob. $1,500,000

On January 1, 2022, Pronto Company acquired all of Speedy Inc.'s voting stock for $12,000,000 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 $1,000,000, 5-year life • Favorable leases, fair value $500,000, 4-year life Speedy's shareholders' equity on January 1, 2022, was $5,000,000 It is now December 31, 2023 (two years later). Speedy reported net income of $400,000 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. Dr (Cr) $10,000,000 Current assets Property and equipment, net 25,000,000 Liabilities (29,000,000) Capital stock (1,000,000) Retained earnings, January 1 (4,400,000) (35,000,000) 30,000,000 4,400,000 Sales revenue Cost of goods sold Operating expenses On the December 31, 2023, consolidation working paper, eliminating entry (R) reduces Investment in Speedy by Select one: O a. $6,675,000 ✓ $0 Ob. $1,500,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Accounting On January 1, 2022, Pronto Company acquired all of Speedy Inc.'s voting stock for $28,800,000. 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 $2,400,000, 5-year life • Favorable leases, fair value $1,200,000, 4-year life ● Speedy's shareholders' equity on January 1, 2022, was $12,000,000. It is now December 31, 2023 (two years later). Speedy reported net income of $960,000 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. Dr (Cr) $24,000,000 Current assets Property and equipment, net 60,000,000 Liabilities (69,600,000) Capital stock (2,400,000) Retained earnings, January 1 (10,560,000) Sales revenue (84,000,000) Cost of goods sold 72,000,000…
In January 1, 2011, Cullmon Company acquired an 80% interest in Toner Company for a purchase price that was $550,000 over the book value of Toner’s Stockholders’ Equity on the acquisition date. The Cullmon allocated the excess to the following [A] assets: [A] Asset Initial Fair Value Useful Life (years) Patent 300,000 10 Goodwill 250,000 Indefinite $550,000 Toner sells inventory to the Cullmon (upstream) which includes that inventory in products that it (Cullmon), ultimately, sells to customers outside of the controlled group. You have compiled the following data as of 2016 and 2017: 2016 2017 Transfer price for inventory sale $ 671,000 $ 733,000 Cost of goods sold (615,000) (653,000) Gross profit $ 56,000 $ 80,000 % inventory remaining 25% 35% Gross profit deferred $ 14,000 $ 28,000 EOY Receivable/Payable $ 90,000 $ 100,000 The inventory not…
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