On January 2, 2017, NIU purchased 100% of Huskie Corp. for $128,000. The book value of the Huskie's assets is $120,000, and the book value of its liabilities is $60,000. The fair market value of the net assets is $80,000. Inventory is recorded in Huskie's financial statements at $20,000, but has a fair market value of $30,000. NIU should report inventory at

Question

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The inventory should be reported at its fair market value of $30,000 because when a company is acquired, its assets are adjusted to their fair market values on the acquisition date.

On January 2, 2017, NIU Purchased 100% of Huskie Corp