On January 1, 2020, Prestige Corporation acquired 100 percent of the voting stock of Stylene Corporation in exchange for $2,475,500 in cash and securities. On the acquisition date, Stylene had the following balance sheet: Cash $ 39,000 Accounts payable $ 1,316,500 Accounts receivable 121,500 Inventory 194,000 Equipment (net) 1,700,000 Common stock 800,000 Trademarks 994,000 Retained earnings 932,000 Total assets $ 3,048,500 Total liabilities and equity $ 3,048,500 At the acquisition date, the book values of Stylenes assets and liabilities were generally equivalent to their fair values except for the following assets: Asset Book Value Fair Value Remaining Useful Life Equipment $ 1,700,000 $ 1,912,000 8 years Customer lists 0 230,000 4 years Trademarks 994,000 1,068,500 indefinite During the next two years, Stylene has the following income and dividends in its own separately prepared financial reports to its parent. Net Income Dividends 2020 $ 229,000 $ 25,000 2021 578,000 45,000 Dividends are declared and paid in the same period. The December 31, 2021, separate financial statements for each company follow. Parentheses indicate credit balances. Prestige Stylene Income Statement Revenues $ (5,180,000 ) $ (3,586,000 ) Cost of goods sold 2,790,000 2,540,000 Depreciation expense 503,000 468,000 Amortization expense 183,000 0 Equity earnings in Stylene (494,000 ) 0 Net income $ (2,198,000 ) $ (578,000 ) Statement of Retained Earnings Retained earnings 1/1 $ (3,160,000 ) $ (1,136,000 ) Net income (above) (2,198,000 ) (578,000 ) Dividends declared 150,000 45,000 Retained earnings 12/31 $ (5,208,000 ) $ (1,669,000 ) Balance Sheet Cash $ 480,000 $ 63,000 Accounts receivable 714,000 92,500 Inventory 959,000 572,000 Investment in Stylene 3,044,500 0 Equipment 6,250,000 1,905,000 Customer lists 186,000 0 Trademarks 2,780,000 890,000 Goodwill 184,000 0 Total assets $ 14,597,500 $ 3,522,500 Accounts payable $ (889,500 ) $ (1,053,500 ) Common stock (8,500,000 ) (800,000 ) Retained earnings, 12/31 (5,208,000 ) (1,669,000 ) Total liabilities and equity $ (14,597,500 ) $ (3,522,500 )