A subsidiary, acquired for cash in a business combination,
owned inventories with a market value greater than the book
value as of the date of combination. A consolidated balance sheet
prepared immediately after the acquisition would include this
difference as part of

(c) The assets acquired would be revalued to their fair
market value. Answer (c) is correct because the inventory account
would then include the difference between the market
value and book value. Answer (a) is incorrect because a deferred
credit is never recorded. Answer (b) is incorrect because goodwill
represents the excess of cost plus the fair value of previously
held interests plus the fair value of noncontrolling interest less
the fair value of net identifiable assets. Answer (d) is incorrect
because the retained earnings account is not affected by this
transaction when acquisition accounting is used.