Par Corporation acquired a 70 percent interest in Sul Corporations outstanding voting common stock on January 1, 2011, for $490,000 cash. The stockholders equity (book value) of Sul on this date consisted of $500,000 capital stock and $100,000 retained earnings. The differences between the fair value of Sul and the book value of Sul were assigned $5,000 to Suls undervalued inventory, $14,000 to undervalued buildings, $21,000 to undervalued equipment, and $40,000 to previously unrecorded patents.

Any remaining excess is goodwill.

The undervalued inventory items were sold during 2011, and the undervalued buildings and equipment had remaining useful lives of seven years and three years, respectively. The patents have a 40-year life. Depreciation is straight line.

At December 31, 2011, Suls accounts payable include $10,000 owed to Par. This $10,000 account payable is due on January 15, 2012. Separate financial statements for Par and Sul for 2011 are summarized as follows (in thousands):

Par Sul $700 Combined Income and Retained Earnings Statements for the Year Ended December 31 Sales Income from Sul Cost of sales Depreciation expense Other expenses Net income Add: Retained earnings January 1 Deduct: Dividends Retained earnings December 31 $ 800 59.5 (300) (154) (160) 245.5 300 (200) $345.5 (400 (60 (140 100 100 (50 $150 $ 60 70 100 Balance Sheet at December 31 Cash Accounts receivable-net Dividends receivable Inventories Other current assets Land Buildings-net Equipment-net Investment in Sul Total assets S 86 100 14 150 70 50 140 570 514.5 $1.694.5 30 100 160 330 $850 Accounts payable Dividends payable Other liabilities Capital stock. $10 par Retained earnings Total equities $ 200 100 49 1.000 345.5 $1.694.5 $ 85 20 95 500 150 $850