Paranich Co.acquired Crowley Co.in a business combination at December 31,20X4.Crowley has a capital asset that it has been amortizing at a rate of $10,000 per year.At the time of the acquisition,the asset had a book value of $70,000 and a fair value of $77,000.The asset has a remaining life of 7 years.With respect to this asset,how much amortization expense should Paranich report on its December 31,20X5 consolidated financial statements?
A)$ 1,000
B)$ 7,700
C)$10,000
D)$11,000

Question

Quizplus · Accepted Answer

The fair value of the asset at acquisition is $77,000 with a remaining life of 7 years, leading to an annual amortization expense of $11,000 ($77,000 / 7 years).