On January 1, Year 4, Par purchased 75% of the common shares of Sub for $4,200,000. On that date, Sub had common shares of $1,000,000 and retained earnings of $2,300,000. The fair values were equal to carrying values for all its net assets except the following: Inventory carrying value was greater than the fair value by $120,000; property, plant and equipment carrying value was less than the fair value by $800,000 (remaining useful life of 8 years), and note payable carrying value was less than the fair value by 90,000 (8 years to maturity) on Sub's books. The financial statements for Par and Sub for the year ended December 31, Year 8 were as follows: Statements of Income For the year ended December 31, Year 8 Par Sub $ 4,400,000 Sales Cost of sales Gross profit $ 5,000,000 3,200,000 2,920,000 1,800,000 1,480,000 Other income 410,000 230,000 Depreciation and amortization expense 700,000 600,000 Other expenses 740,000 500,000 Income tax expense 340,000 220,000 Net income 430,000 390,000 Statements of Retained Earnings For the year ended December 31, Year 8 Retained earnings, beginning Net income Dividends paid Retained earnings, end 4,000,000 430,000 (140,000) $ 4,290,000 3,300,000 390,000 (100,000) $ 3,590,000