Mercedes Company Paid $20,000,000 to Purchase 100% of the Outstanding

Mercedes Company paid $20,000,000 to purchase 100% of the outstanding common stock of Benz Incorporated on January 1,2015.The book value of Benz's net assets on the date of acquisition was $17,000,000.Benz's buildings were undervalued by $1,500,000 as of January 1,2015;the buildings had a ten-year remaining life as of the date of acquisition.All other assets and liabilities of Benz are being reported at market value.Mercedes retained earnings as of January 1,2015 was $5,750,000,while Benz reported retained earnings of $3,175,000.Mercedes net income was $1,750,000 during 2015 and was $2,035,000 during 2016;the 2015 and 2016 net income amounts did not include any amounts pertaining to the Benz investment.Benz's retained earnings increased $1,050,000 from January 1,2015 to December 31,2016 even though Benz declared $225,000 of dividends during that two-year period.
Required:
Determine the December 31,2016 consolidated retained earnings balance.