This problem refers to P8-10. Assume the same facts as in P8-10 except that the FMVs for the inventory and fixed assets of Rachel are not as precisely specified. That is, appraisers have indi¬ cated that the FMV of the inventory is between $65,000 and $75,000 and that the FMV of the fixed assets is between $115,000 and $125,000. You, as the accountant for Rice and Associates, can use any value within these ranges to record the acquisition. Chapter 8 Investments in Equity Securities 405 REQUIRED:

a. Assume that you wish to maximize reported income in the next period. What dollar amounts would you allocate to Rachel’s inventory, fixed assets, and goodwill when record¬ ing the acquisition? Explain.

b. Assume that you wish to minimize reported income in the next period (e.g., when prepar¬ ing the transaction for tax purposes). What dollar amounts would you allocate to Rachel’s inventory, fixed assets, and goodwill when recording the acquisition? Explain.