Use the Following Information for Questions:
Chocolate Inc -The Amount of the Investment in the Chocolate Co

question 31

Multiple Choice

Use the following information for questions:
Chocolate Inc. and Toffee Co. agreed to merge. Chocolate Inc. issued 10,000 shares with a market value of $120,000 for all of Toffee’s shares. Fixed assets were undervalued by $40,000. Straight-line amortization over 10 years was used for all fair market value differences. Summary balance sheet data as of the date of merger and net income after the first year is shown below: $\begin{array}{lrr}&\text { Chocolate Inc.}&\text { Toffee Co. }\\\hline\text { Total assets } & \$ 270,000 & \$ 75,000 \\\text { Common shares } & 140,000 & 40,000 \\\text { Retained earnings } & 20,000 & 5,000 \\\text { Net income after the first year } & \$ 90,000 & \$ 30,000\end{array}$
-The amount of the investment in the Chocolate Co.account on Toffee's books on the date of acquisition would be:

• A)$ 40,000
• B)$ 45,000
• C)$115,000
• D)$120,000

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