On December 31, 20X6, Retail Ltd. purchased 100% of the outstanding shares of Supply Corporation by issuing Retail Ltd. shares worth $980,000 at current market prices. Supply Corporation was a supplier of merchandise to Retail Ltd.; Retail had purchased more than 80% of Supply€™s total output in 20X6. Supply had experienced declining profitability for many years, and in 20X4 began experiencing losses. By December 31, 20X6, Supply had accumulated tax-loss carryforwards amounting to $160,000. In contrast, Retail Ltd. was quite profitable, and analysts predicted that Retail€™s positioning in the retail market was well suited to weather economic downturns without undue deterioration in profit levels. Retail thinks that it is highly probable that Supply Corporation will have sufficient taxable income in the future to utilize its tax loss carryforward. The applicable future tax rate is 40%.
The SFP for Supply Corporation at the date of acquisition is shown below, together with estimates of the fair values of Supply€™s recorded assets and liabilities. In addition, Supply held exclusive Canadian rights to certain production processes; the fair value of these rights was estimated to be $196,000.

Required

Explain what values should be assigned to Supply Corporation€™s assets and liabilities when Retail Ltd. prepares its consolidated financial statements (including goodwill, if any).

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Supply Corporation Statement of Financial Position December 31, 20X6 Assets CURRENT ASSETS: Cash $30,000 Accounts receivable (net) 45,000 Inventories 190,000 265,000 PLANT, PROPERTY, AND EQUIPMENT: Buildings 650,000 Machinery and equipment Accumulated depreciation 450,000 (400,000) 700,000 Land 220,000 920,000 Investments in shares 90,000 TOTAL ASSETS $1,275,000 Liabilities and shareholders' equity CURRENT LIABILITIES: Accounts payable $95,000 Unearned revenue 190,000 Current portion of long-term debt 100,000 385,000 Bonds payable 400,000 SHAREHOLDERS' EQUITY: Common shares 150,000 Retained earnings 340,000 490,000 $1,275,000 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY