Cost method consolidation entries (controlling investment in affiliate, fair value differs from book value)

Assume an investee has the following financial statement information for the three years ending December 31, 2019:

(At December 31)

2019

2018

2017

Current assets

$285,000

$277,500

$207,000

Tangible fixed assets

662,500

575,000

563,000

Intangible assets

40,000

45,000

50,000

Total assets

$987,500

$897,500

$820,000

Current liabilities

$120,000

$110,000

$850,000

Noncurrent liabilities

266,250

242,500

220,000

Common stock

100,000

100,000

100,000

Additional paid-in capital

100,000

100,000

100,000

Retained earnings

400,000

345,000

300,000

Stockholders' equity

600,000

545,000

500,000

Total liabilities and equity

$986,250

$897,500

$820,000

(For the years ended December 31)

2019

2018

2017

Revenues

$970,000

$920,000

$850,000

Expenses

875,000

840,000

775,000

Net income

$95,000

$80,000

$75,000

Dividends

$40,000

$35,000

$25,000

Assume on January 1, 2017, an investor company purchased 100% of the outstanding voting common stock of the investee. On the date of the acquisition, the investee's identifiable net assets had fair values that approximated their historical book values, except for tangible fixed assets, which had fair value that was $112,500 higher than the investee's recorded book value. The tangible fixed assets had a remaining useful life of 6 years. In addition, the acquisition resulted in goodwill in the amount of $218,750 recognized in the consolidated financial statements of the investor company. On January 1, 2017, the investee's retained earnings balance was $250,000. Assuming that the investor company uses the cost method to account for its investment in the investee, what is the amount of the [ADJ] entry necessary to prepare the consolidated financial statements for the year ended December 31, 2019? Please Explain.

A) 57,500

B) 93,750

C) 95,000

D) 150,000