The Following Information Pertains to Questions

question 29

Multiple Choice

The following information pertains to questions
On January 1,2009,Hanson Inc.purchased 54,000 of Marvin Inc.'s 90,000 outstanding voting shares for $240,000.On that date,Marvin's common stock and retained earnings were valued at $60,000 and $90,000 respectively.Marvin's book values approximated its fair values on the acquisition date with the exception of the company's equipment,which was estimated to have a fair market value that was $50,000 in excess of its recorded book value.The equipment was estimated to have a useful life of eight years.Both companies use straight line amortization exclusively.
On January 1,2010,Hanson purchased an additional 9,000 shares of Marvin Inc.on the open market for $45,000.On this date,Marvin's book values were equal to its fair market values with the exception of the company's equipment,which is now thought to be undervalued by $60,000.Moreover,the equipment's estimated useful life was revised to 4 years on this date.
Marvin's net Income and dividends for 2009 and 2010 are as follows: Marvin's goodwill was subject to an impairment loss of $5,000 during 2009.Hanson ABC Inc.uses the equity method to account for its investment in Marvin Inc.
-Assuming that Hanson had no recorded goodwill prior to January 1,2009,what would be the amount of goodwill appearing on Hanson' December 31,2009 consolidated balance Sheet?

• A)$80,000
• B)$75,000
• C)$89,900
• D)$195,000

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Definitions:

Wage and Tax Statement

A document provided by employers to employees detailing the employee's earnings and taxes withheld during the year; commonly referred to as a W-2 form.

Employee's Earnings Record

A detailed record maintained by employers that tracks the wages or salaries earned by each employee over time, including taxes and deductions.

Payroll Register

A document listing each employee’s pay details for each payroll period, including wages, deductions, and net pay.

FICA Tax

Federal Insurance Contributions Act tax; a U.S. federal payroll tax that funds Social Security and Medicare.