Par Corporation acquired all the stock of Sad Corporation on January 1, 2011, for $280,000 cash, when the book values and fair values of Sad's assets and liabilities were as follows (in thousands):

Sad's buildings have a remaining life of 10 years, and the equipment has a useful life of 2 years from the date of the combination. During 2011, Sad had income of $50,000 and paid dividends of $20,000. Par and Sad are subject to a 35 percent tax rate.REQUIRED1. Prepare a schedule to allocate the excess fair value over book value to Sad's assets, liabilities, deferred taxes, and goodwill at January 1, 2011, assuming the purchase was a taxable transaction.2. Prepare a schedule to allocate the excess fair value over book value to Sad's assets, liabilities, deferred taxes, and goodwill at January 1, 2011, assuming the purchase was a tax-free reorganization.3. Compute Par's income from Sad for 2011 under both options.

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Book Values (Tax Bases) Fair Values $100 20 $100 60 Current assets Land 80 60 Buildings-net Equipment-net Assets 110 70 $260 $340 $ 90 $90 Liabilities Capital stock Retained earnings Equities 150 $260