Following are the individual financial statements for Gibson and Davis for the year ending December 31, 2021: Gibson Davis Sales $ (718,000 ) $ (355,000 ) Cost of goods sold 332,000 150,000 Operating expenses 214,000 75,000 Dividend income (24,000 ) 0 Net income $ (196,000 ) $ (130,000 ) Retained earnings, 1/1/21 $ (705,000 ) $ (410,000 ) Net income (196,000 ) (130,000 ) Dividends declared 60,000 40,000 Retained earnings, 12/31/21 $ (841,000 ) $ (500,000 ) Cash and receivables $ 228,500 $ 133,000 Inventory 504,000 137,000 Investment in Davis 511,500 0 Buildings (net) 538,000 610,000 Equipment (net) 494,000 494,000 Total assets $ 2,276,000 $ 1,374,000 Liabilities $ (805,000 ) $ (534,000 ) Common stock (630,000 ) (340,000 ) Retained earnings, 12/31/21 (841,000 ) (500,000 ) Total liabilities and stockholders' equity $ (2,276,000 ) $ (1,374,000 ) Gibson acquired 60 percent of Davis on April 1, 2021, for $511,500. On that date, equipment owned by Davis (with a five-year remaining life) was overvalued by $75,000. Also on that date, the fair value of the 40 percent noncontrolling interest was $341,000. Davis earned income evenly during the year but declared the $40,000 dividend on November 1, 2021.