1. Quiz Company acquired 10% of the outstanding common stock of Another Company of January 1,...

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1. Quiz Company acquired 10% of the outstanding common stock of Another Company of January 1, 2020 for $4 million. On the date of acquisition, the fair value of Another Company's net assets exceeded the book value by $800,000. Half of the difference was attributable to land, and half was attributable to a building with a remaining useful life of 10 years. During 2020, Another Company paid dividends of $500,000. For the year ended December 31, 2020, Another Company reported net income of $1 million. As of December 31, 2020, the fair value of Another Company common stock held by Quiz Company was $3.75 million. As a result of the investment, pre-tax income for the year ended December 31, 2020 would Increase by $96,000 Decrease by $250,000 Increase by $50,000 Decrease by $200,000 1. Quiz Company acquired 10% of the outstanding common stock of Another Company of January 1, 2020 for $4 million. On the date of acquisition, the fair value of Another Company's net assets exceeded the book value by $800,000. Half of the difference was attributable to land, and half was attributable to a building with a remaining useful life of 10 years. During 2020, Another Company paid dividends of $500,000. For the year ended December 31, 2020, Another Company reported net income of $1 million. As of December 31, 2020, the fair value of Another Company common stock held by Quiz Company was $3.75 million. As a result of the investment, pre-tax income for the year ended December 31, 2020 would Increase by $96,000 Decrease by $250,000 Increase by $50,000 Decrease by $200,000

Answer rating: 100% (QA)

The decrease in fair value would lead Acquiring Company an un... View the full answer