On January 1, 2020, Pinnacle Corporation exchanged $3,347,500 cash for 100 percent of the outstanding voting stock of Strata Corporation. On the acquisition date, Strata had the following balance sheet: Cash $ 146,000 Accounts payable $ Accounts receivable 374,000 Long-term debt Inventory 397,000 Common stock Buildings (net) 2,045,000 Retained earnings. 422,000 3,085,000 1,500,000 1,180,000 Licensing agreements 3,225,000 Total assets $ 6,187,000 Total liabilities and equity $ 6,187,000 Pinnacle prepared the following fair-value allocation: Fair value of Strata (consideration transferred) Carrying amount acquired Excess fair value to buildings (undervalued) to licensing agreements (overvalued) to goodwill (indefinite life) $ 3,347,500 2,680,000 $ 667,500 $ 352,000 (124,000) 228,000 $ 439,500 At the acquisition date, Strata's buildings had a 10-year remaining life and its licensing agreements were due to expire in 5 years. On December 31, 2021, Strata's accounts payable included an $94,400 current liability owed to Pinnacle. Strata Corporation continues its separate legal existence as a wholly owned subsidiary of Pinnacle with independent accounting records. Pinnacle employs the initial value method in its internal accounting for its investment in Strata. The separate financial statements for the two companies for the year ending December 31, 2021, follow. Credit balances are indicated by parentheses. Sales Cost of goods sold: Interest expense Pinnacle Strata $ (7,563,000) $ (3,351,000) 4,845,000 322,000 1,880,000 243,000