Woods, Inc., and Scott, Inc., formed a business combination on January 1, 2009, when Woods acquired a 60 percent interest in Scott’s common stock for $372,000. Scott’s book value on that day was $320,000 and the fair value of the 40 percent noncontrolling interest was $248,000, The sub¬ sidiary held patents (with a 10-year remaining life) that were undervalued within the company’s accounting records by $70,000 and an unrecorded customer list (15-year remaining life) assessed at a $45,000 fair value. Any remaining excess acquisition-date fair value was assigned to goodwill. Since acquisition, Woods has applied the equity method to its Investment in Scott account for inter¬ nal record-keeping purposes, and no goodwill impairment has occurred.

Intercompany inventory sales between the two companies have been made as follows: LO8 Year Cost to Woods Transfer Price to Scott Ending Balance (at transfer price)

2009 120,000 150,000 50,000 2010 112,000 160,000 40,000