Question
On January 3, 2021, Madison Corp. purchased 30% of the voting common stock of Huntsville Co., paying $3,000,000. Madison decided to use the equity method
On January 3, 2021, Madison Corp. purchased 30% of the voting common stock of Huntsville Co., paying $3,000,000. Madison decided to use the equity method to account for this investment. At the time of the investment, Huntsvilles total stockholders equity was $8,000,000. Madison gathered the following information about Huntsvilles assets and liabilities:
Book Value | Fair Value | |||||
Buildings (10-year life) | $ | 400,000 | $ | 600,000 | ||
Equipment (5-year life) | 1,200,000 | 1,400,000 | ||||
Franchises (8-year life) | $ | 0 | $ | 480,000 | ||
For all other assets and liabilities, book value and fair value were equal. Any excess of cost over fair value was attributed to goodwill, which has not been impaired. What is the amount of goodwill associated with the investment?
A) $600,000. B) $264,000. C) $0. D) $336,000. E) $480,000.
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