On 1/1/20x0, Prospector, Inc. paid $5,875,000 to acquire 100% of the outstanding common stock of Sinclair Company. After the acquisition, Sinclair will remain in business as a separate operating company. Additionally, Prospector, Inc. will account for their investment using the equity method.

At the acquisition date, Sinclair Corporations stockholders equity was as follows:

Sinclair Corporation Statement of Shareholders' Equity 1/1/20x0
Retained earnings	$1,500,000
Common Stock	500,000
Total Shareholders Equity 1/1/20x0	$2,000,000

In addition, the fair value in excess of book value and the remaining useful lives of certain noncurrent assets/noncurrent liabilities of Sinclair Company at acquisition were:

• Software licenses, (10-years): $2,500,000,
• Unpatented technology (8 years): $800,000, and
• Understatement of long-term debt (5 years): $100,000

The book value of all other assets and liabilities were equal to their fair values.

During 20x0, Sinclair reported net income of $480,000 while paying dividends of $25,000. During 20x1, Sinclair reported net income of $960,000 while paying dividends of $50,000.

1. Record Prospector Inc.s acquisition of Sinclair Corporation at 1/1/20x0.