X acquired 80% of B on 1 January 20X3. The consideration paid on that date comprised 123,000 $1 ordinary shares with a market value of $2.50 each and $150,000 in cash. A further $25,000 will be payable in January 20X6 if profits of B exceed $50,000 p.a. for the next three years. All forecasts indicate that B will easily exceed these targets. X has not accounted for the contingent consideration.

The statement of financial position of B on 1 January 20X3 showed net assets of $415,000. The fair values of the net assets of the subsidiary were considered to be equivalent to the book values with the exception of:

The company can borrow money at 10%.

The discount factors are:

Calculate the following: