Par of Chicago acquired all the outstanding capital stock of Sar of London on January 1, 2011, for $1,280,000. The exchange rate for British pounds was $1.60 and Sar's stockholders' equity was 800,000, consisting of 500,000 capital stock and 300,000 retained earnings. The functional currency of Sar is the U.S. dollar. Exchange rates for British pounds for 2011 are as follows: Current rate December 31, 2010 Current rate December 31, 2011 Average exchange rate for 2011 Exchange rate for dividends $1.60 1.70 1.65 1.64 Sar's cost of goods sold consists of 200,000 inventory on hand at January 1, 2011, and pur- chases of 600,000 less 150,000 inventory on hand at December 31,2011, that was acquired at an exchange rate of $1.68. All of Sar's plant assets were on hand when Par acquired Sar, and Sar's other expenses were paid in cash or relate to accounts payable