Reference no: EM132794599
On January 1, Jennie Corporation purchased 30% of the common stock of Katlee Company for $500,000. The following information relates to Katlee at the date of acquisition.
Cash $ 50,000
Accounts receivable (net) 250,000
Building (net) 700,000
Land 100,000
Liabilities 100,000
Additional information relating to the purchase appears below.
1. Jennie has the ability to exercise significant influence over Katlee and did not elect the fair value option.
2. Both the carrying amount and the fair value are the same for receivables, land, and liabilities.
3. The fair value of the building is $900,000.
4. Jennie depreciates its assets on a straight-line basis. Both tangible and intangible assets are amortized over 10 years.
5. For the current year, Katlee had net income of $400,000 and declared and paid dividends of$100,000.
Problem 1: The amount of equity method goodwill related to Jennie's acquisition of Katlee at January 1 was
A. $0
B. $60,000
C. $140,000
D. $200,000
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