On January 1, 2020, Paloma Corporation exchanged $1,710,000 cash for 90 percent of the outstanding voting stock of San Marco Company. The consideration transferred by Paloma provided a reasonable basis for assessing the total January 1, 2020, fair value of San Marco Company. At the acquisition date, San Marco reported the following owners’ equity amounts in its balance sheet:
Common stock . . . . . . . . . . . . . . . . . . . $ 400,000
Additional paid-in capital . . . . . . . . . .       60,000
Retained earnings . . . . . . . . . . . . . . . .     265,000

In determining its acquisition offer, Paloma noted that the values for San Marco’s recorded assets and liabilities approximated their fair values. Paloma also observed that San Marco had developed internally a customer base with an assessed fair value of $800,000 that was not reflected on San Marco’s books. Paloma expected both cost and revenue synergies from the combination. At the acquisition date, Paloma prepared the following fair-value allocation schedule:
Fair value of San Marco Company . . . . . . . . . . . . . . . . . .$ 1,900,000
Book value of San Marco Company . . . . . . . . . . . . . . . . . .    725,000
Excess fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,175,000
to customer base (10-year remaining life) . . . . . . . . . . . .     800,000
to goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 375,000
At December 31, 2021, the two companies report the following balances:

At year-end, there were no intra-entity receivables or payables.
a. Determine the consolidated balances for this business combination as of December 31, 2021.
b. If instead the noncontrolling interest’s acquisition-date fair value is assessed at $167,500, what
changes would be evident in the consolidated statements?

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Paloma San Marco Revenues $(1,843,000) $ (675,000) Cost of goods sold Depreciation expense Amortization expense Interest expense Equity in income of San Marco 1,100,000 322,000 125,000 120,000 11,000 275,000 27,500 7,000 (121,500) $ (437,000) -0- Net income... $(215,000) $ (395,000) (215,000) 25,000 Retained earnings, 1/1 $(2,625,000) (437,000) 350,000 Net income . Dividends declared Retained earnings, 12/31. $ 585,000) $ 430,000 -0- $2,712.000) Current assets $ 1,204,000 Investment in San Marco 1,854,000 931,000 Buildings and equipment Copyrights .. 863,000 107,000 $ 1,400,000 950,000 Total assets $ 4,939,000 Accounts payable Notes payable Common stock . Additional paid-in capital Retained earnings, 12/31 $ (485,000) (542,000) (900,000) (300,000) (2.712,000) $ (200,000) (155,000) (400,000) (60,000) (585,000) $(1,400,000) Total liabilities and equities $(4,939,000)