DC Company Purchased 80% of the Outstanding Common Shares of FA

question 12

Multiple Choice

DC Company purchased 80% 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 assuming no impairment has occurred?

• A)$0
• B)$10,000
• C)$52,500
• D)$58,500

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