Pavement Corp. (Pavement) has been operating since 1998. It is now December 31, 2004, and Pavement is about to prepare consolidated financial statements for Pavement and its subsidiary, Sigur, Co. (Sigur). Pavement acquired 80 percent of the outstanding common stock of Sigur on January 1, 2004, for $1,416,000. An independent appraisal indicated that the remaining 20% interest in Sigur is worth $354,000. On the acquisition date, Sigur reported owners equity of $1,375,000. The fair values of the net assets of Sigur are equal to their book values except for the following: