Mitzy's Muffins Ltd

question 24

Multiple Choice

Mitzy's Muffins Ltd.purchased a commercial baking system for $150,000 at the beginning of 20X1.The estimated economic life of the system is 10 years and Mitzy's uses straight-line amortization.At the beginning of 20X3,Delicious Bakeries Ltd.acquired Mitzi's in a business combination.At the time of the acquisition,Mitzi's baking system had a fair value of $140,000.With respect to the baking system,how much amortization expense should Delicious Bakeries report on its consolidated financial statements at the end of 20X3?

• A)$ 2,500
• B)$14,000
• C)$15,000
• D)$17,500

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Definitions:

Insurable Interest

The requirement that a person stands to suffer a financial loss or certain other kinds of losses if the insured event occurs.

Retains

implies holding onto or keeping in possession, often used in legal and financial contexts to describe holding onto services, rights, or properties.

Shipment Contract

An agreement between a seller and buyer where the seller is obligated to ship the goods and the buyer is obligated to accept and pay for them, under specified terms.

Title Passes

The transfer of ownership of property from one party to another, typically upon satisfaction of specified conditions.