E 14-3 Acquisition date effects On January 1, 2016, Pai, a U.S. firm, purchases all the outstanding capital stock of Sta, a British firm, for $880,000, when the exchange rate for British pounds is $1.55. The book values of Sta’s assets and liabilities are equal to fair values on this date, except for land that has a fair value of £200,000 and equipment with a fair value of £100,000.

Summarized balance sheet information for Pai in U.S. dollars and for Sta in pounds just before the business combination is as follows:

Pai Sta Current assets $3,000,000 £100,000 Land 800,000 100,000 Buildings—net 1,200,000 250,000 Equipment—net 1,000,000 50,000

$6,000,000 £500,000 Current liabilities $600,000 £50,000 Notes payable 1,000,000 150,000 Capital stock 3,000,000 200,000 Retained earnings 1,400,000 100,000

$6,000,000 £500,000 REQuIRED: Prepare a consolidated balance sheet for Pai and Subsidiary at January 1, 2016, immediately after the business combination.