ABC IncAcquired 40% of the Voting Shares of DEF Inc

question 24

Multiple Choice

ABC Inc.acquired 40% of the voting shares of DEF Inc.for $200,000 on January 1,2001.On that date,DEF's Common Shares and Retained Earnings were worth $240,000 and $60,000 respectively.On that date,DEF's Book Values approximated their Fair Values except for DEF's Inventory,which had a market value $50,000 higher than book value,and DEF's Plant & Equipment,which was said to have a market value that was $80,000 higher than its book value.The inventory was subsequently sold to outsiders during the year.The Plant and Equipment had a remaining useful life of ten years from the acquisition date.During the year,DEF earned net income and paid Dividends in the amount of $100,000 and $10,000,respectively.
-What is the amount of Goodwill arising from ABC's acquisition of DEF?

• A)($100,000)
• B)$ 28,000
• C)$ 80,000
• D)$100,000

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