On January 1, 2011, Jackie Corp. purchased 30% of the voting common stock of Rob Co., paying $2,000,000. Jackie properly accounts for this investment using the equity method. At the time of the investment, Rob's total stockholders' equity was $3,000,000. Jackie gathered the following information about Rob's assets and liabilities whose book values and fair values differed:
Building(15 years life),book value:1,000,000. Fair value:2,500,000.
Equipment(5 years life),book value:2,500,000. Fair value:3,000,000.
Franchise(10 years life), book value:0. Fair value:500,000.
Any excess of cost over fair value was attributed to goodwill, which has not been impaired. Rob Co. reported net income of $300,000 for 2011, and paid dividends of $100,000 during that year.
How much goodwill is associated with this investment?
A. $(500,000).
B. $0.
C. $650,000.(Correct)
D. $1,000,000.
E. $2,000,000.