At the Date of Acquisition, a Subsidiary's Inventory (LIFO, Still

Multiple Choice

At the date of acquisition, a subsidiary's inventory (LIFO, still held by the subsidiary) 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 third year following acquisition, the subsidiary reports net income of $2,500. Using the complete equity method, in the third year the parent reports equity in the net income of the subsidiary of:

A) $3,500
B) $2,100
C) $2,400
D) $2,900