On July 1, 2000, Pushway Corporation issued 200,000 shares of \($5\) par value common stock in exchange for all of Stroker Company’s common stock. This stock had a fair value that was \($200,000\) in excess of Stroker’s stockholders’ equity on the date of exchange. This difference was attributed to the fact that the fair value of Stroker’s equipment was higher than book value.
The equipment has an estimated remaining life of 10 years. Pushway and Stroker reported depreciation expense in 2000 of \($400,000\) and \($100,000,\) respectively, before consolidation and before any adjustment for the exchange. For financial reporting purposes, both companies use a calendar year and the straight-line depreciation method with depreciation calculated on a monthly basis beginning with the month of acquisition.
Required:
1. Assume that the business combination is appropriately accounted for as a purchase. How much consolidated depreciation expense would be reported in 2000?
2. Assume that the business combination is appropriately accounted for as a pooling of interests.
How much consolidated depreciation expense would be reported in 2000?