At the Date of Acquisition, a Subsidiary's Inventory (FIFO, Sold

Multiple Choice

At the date of acquisition, a subsidiary's inventory (FIFO, sold in the year of acquisition) is overvalued by $600, its plant assets (10-year life, straight-line) are overvalued by $4,000, and it has previously unreported intangibles valued at $1,000 (2-year life, straight-line) . Goodwill from the acquisition is not impaired. In the second year following acquisition, the subsidiary reports net income of $2,000. Using the complete equity method, in the second year the parent reports equity in the net income of the subsidiary of:

A) $1,100
B) $1,900
C) $1,300
D) $500