On December 31,2008,Melkor Corporation Acquired 80 Percent of Sydney Company's

question 1

Multiple Choice

On December 31,2008,Melkor Corporation acquired 80 percent of Sydney Company's common stock for $160,000.At that date,the fair value of the noncontrolling interest was $40,000.Of the $75,000 differential,$10,000 related to the increased value of Sydney's inventory,$20,000 related to the increased value of its land,and $25,000 related to the increased value of its equipment that had a remaining life of 10 years from the date of combination.Sydney sold all inventory it held at the end of 2008 during 2009.The land to which the differential related was also sold during 2009 for a large gain.At the date of combination,Sydney reported retained earnings of $75,000 and common stock outstanding of $50,000.In 2009,Sydney reported net income of $60,000,but paid no dividends.Melkor accounts for its investment in Sydney using the equity method.
-Based on the preceding information,what is the amount of write-off of differential associated with this acquisition recorded by Melkor during 2009?

• A)$0
• B)$32,500
• C)$26,000
• D)$20,000

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