What would be the amount of amortization

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LEO Inc. acquired a 60% interest in MARS Inc. on January 1, 2019 for $400,000. Unless otherwise stated, LEO uses the cost method to account for its investment in MARS Inc. On the acquisition date, MARS had common stock and retained earnings valued at $100,000 and $150,000 respectively. The acquisition differential (fair value adjustment) was allocated as follows: $80,000 to undervalued inventory and $40,000 to undervalued equipment (to be amortized over 20 years).

Problem 1: What would be the amount of amortization for 2020 based on the amortization schedule for the Fair Value adjustments, assuming that there is no impairment of goodwill?

Option 1: $78000

Option 2: $2000

Option 3: $40000

Option 4: $82000

Reference no: EM132968913

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