Branson paid $465,000 cash for all of the outstanding common stock of Wolf pack, Inc., on January 1, 2011. On that date, the subsidiary had a book value of $340,000 (common stock of $200,000 and retained earnings of $140,000), although various unrecorded royalty agreements were assessed at a $100,000 fair value. The royalty agreements had an estimated 10-year remaining useful life. In negotiating the acquisition price, Branson also promised to pay Wolf pack’s former owners an additional $50,000 if Wolf pack’s income exceeded $120,000 total over the first two years after the acquisition. At the acquisition date, Branson estimated the probability adjusted present value of this contingent consideration at $35,000. On December 31, 2011, based on Wolf pack’s earnings to date, Branson increased the value of the contingency to $40,000. During the subsequent two years, Wolf pack reported the following amounts for income and dividends: