On January 1, Year 4, Cyrus Inc. paid $915,000 in cash to acquire all of the ordinary shares of Fazli Company. On that date, Fazli's retained earnings were $201,000. All of Fazli's assets and liabilities had fair values equal to carrying amounts except for an investment in bonds, which was worth $13,012 more than carrying amount and will mature on December 31, Year 8. The recoverable amount for goodwill was $200,000 at the end of Years 4 and 5.

In Year 4, Cyrus reported net income from its own operations (exclusive of any income from Fazli) of $126,000 and declared no dividends. In Year 4, Fazli reported net income of $91,000 and paid a $41,000 cash dividend. Cyrus uses the cost method to report its investment in Fazli and uses the effective interest method to amortize premiums or discounts on investment in bonds. The amortization of the acquisition differential pertaining to the investment in bonds was $2,389 in Year 4 and $2,492 in Year 5.

The financial statements for Cyrus and Fazli for the year ended December 31, Year 5, were as follows: