Blue Box Company was purchased for $115 million 10 years ago by the Big Box Company. The assessed (market) value of assets at the time of purchase was estimated at $90 million and the additional cash paid over the purchase price was recorded as goodwill. As a result of various product defects over the years, the market value of the Blue Box acquisition dropped to $80 million. Big Box recorded the corresponding impairment loss but instead of spinning off the division, management at Big Box invested heavily this past year in quality improvement programs that resulted in an increase in the market value of the Blue Box acquisition up to $120 million. In the current year, Big Box should:

• reinstate the original $25 million recognized as goodwill at acquisition.

• write up Blue Box goodwill to the new $120 million market value.

• record additional goodwill of $5 million.

• do nothing with respect to the higher market value of Blue Box.