On January 1, Jarel acquired 80 percent of the outstanding voting stock of Suarez for $260,000 cash consideration. The remaining 20 percent of Suarez had an acquisition-date fair value of $65,000. On January 1, Suarez possessed equipment (5-year life) that was undervalued on its books by $25,000. Suarez also had developed several secret formulas that Jarel assessed at $50,000. These formulas, although not recorded on Suarez’s financial records, were estimated to have a 20-year future life.
As of December 31, the financial statements appeared as follows:
| Jarel | Suarez |
Revenues | $ (300,000) | $(200,000) |
Cost of goods sold | 140,000 | 80,000 |
Expenses | 20,000 | 10,000 |
Net income | $ (140,000) | $(110,000) |
Retained earnings, 1/1 | $ (300,000) | $(150,000) |
Net income | (140,000) | (110,000) |
Dividends paid | -0- | -0- |
Retained earnings, 12/31 | $ (440,000) | $(260,000) |
Cash and receivables | $ 210,000 | $ 90,000 |
Inventory | 150,000 | 110,000 |
Investment in Suarez | 260,000 | -0- |
Equipment (net) | 440,000 | 300,000 |
Total assets | $ 1,060,000 | $ 500,000 |
Liabilities | $ (420,000) | $(140,000) |
Common stock | (200,000) | (100,000) |
Retained earnings, 12/31 | (440,000) | (260,000) |
Total liabilities and equities | $(1,060,000) | $(500,000) |
During the year, Jarel bought inventory for $80,000 and sold it to Suarez for $100,000. Of these goods, Suarez still owns 60 percent on December 31.
What is the consolidated total for inventory at December 31?
a. $240,000.
b. $248,000.
c. $250,000.
d. $260,000.
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