Three months after the acquisition, a fire damages SX’s equipment, reducing its fair value from \($6,000\) to \($4,000\). How does PR report this event?

a. Loss of \($2,000\), reported on the income statement

b. \($2,000\) increase in goodwill

c. \($2,000\) increase in goodwill

d. Not reported 

PR Company pays \($10,000\) in cash and issues no-par stock with a fair value of \($40,000\) to acquire all of SX Corporation’s net assets. SX’s balance sheet at the date of acquisition is as follows:

PR’s consultants find these items that are not reported on SX’s balance sheet:

Outside consultants are paid \($200\) in cash, and registration fees to issue PR’s new stock are \($400.\)

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Current assets Property, plant & equipment, net. Identifiable intangible assets Total assets Current liabilities. SX Corporation Book value $ 2,000 10,000 4,000 Fair value $ 4,200 6,000 14,000 $16,000 $1,600 $ 2,000 Long-term debt 12,000 11,600 Capital stock 5,000 Retained earnings 8,000 Accumulated other comprehensive income. (1,000) Treasury stock (9,600) Total liabilities & equity. $16,000