Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2018, for $788,160 cash. At the acquisition date, Sierras total fair value, including the noncontrolling interest, was assessed at $985,200 although Sierras book value was only $633,000. Also, several individual items on Sierras financial records had fair values that differed from their book values as follows:

Problem 4-39 (L0 4-1,4-5, 4-6) Padre, Inc., buys 80 percent of the outstanding common stock of Sierra Corporation on January 1, 2018, for $788,160 cash. At the acquisition date, Sierra's total fair value, including the noncontrolling interest, was assessed at $985,200 although Sierra's book value was only $633,000. Also, several individual items on Sierra's financial records had fair values that differed from their book values as follows Book Value Fair Value $ 68,300 Land Buildings and equipment (10-year remaining life) Copyright (20-year remaining life) Notes payable (due in 8 years) 353,000 108,000 (198,000) 323,300 305,000 240,000 (184,800) For internal reporting purposes, Padre, Inc., employs the equity method to account for this investment. The following account balances are for the year ending December 31, 2018, for both companies Padre Sierra Revenues Cost of goods sold Depreciation expense Amortization expense Interest expense Equity in income of Sierra (1,577,860)(579,000) 388,000 18,800 5, 400 6,800 743,000 349,000 51,100 125, 240 Net income $(560,000) $(160,000) Retained earnings, 1/1/18 Net income Dividends declared $ (1,450,000) (473,000) (160,000) (560,000) 260,000 65,000 (1,750,000) (568,000) Retained earnings, 12/31/18 Current assets Investment in Sierra Land Buildings and equipment (net) Copyright $ 1,176,600 $ 572,900 861,400 333,000 882,000 68,300 334,200 102,600 Total assets $ 3,253,000 1,078,000 Accounts payable Notes payable Common stock Additional paid-in capital Retained earnings (above) $ (222,000) $(152,000) (198,000) (100,000) (60,000) (531,000) (300,000) 450,000) 1,750,000 568,000 Total liabilities and equities $(3,253,000) $(1,078,000)