DC Company Purchased 100% of the Outstanding Common Shares of FA

question 22

Multiple Choice

DC Company purchased 100% of the outstanding common shares of FA Company on December 31,20X3 for $170,000.At that date,FA had $100,000 of outstanding common stock and retained earnings of $30,000.It was agreed that the net assets were fairly valued except that the fair value of the capital assets exceeded their net book value by $20,000 and the carrying value of the inventory exceeded its fair value by $10,000.The capital assets had a remaining useful life of eight years as of the acquisition date and have no salvage value.Inventory turns over four times a year.It is now 20X6 and DC has been very pleased with how profitable its investment in FA has been.On DC's consolidated financial statements at December 31,20X6,what balance should be reported for goodwill?

• A)$10,000
• B)$30,000
• C)$40,000
• D)$70,000

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Definitions:

Testes

The primary male reproductive organs that produce sperm and testosterone.

Bulbourethral Glands

Small glands near the male urethra that produce a clear fluid that lubricates and neutralizes acidity in the urethra during sexual arousal.

Cowper's Glands

Small glands located on the sides of the urethra in the male reproductive system that produce a fluid to lubricate the urethra and neutralize its acidity.

Gynecomastia

A medical condition in males where there is an enlargement of the breast tissues.