1. On January 1, 2009, Rand Corp. issued shares of its common stock for all of the outstanding common stock of Spaulding Inc. This combination was accounted for using the acquisition method. Spaulding's book value was only $140,000 at the time, but Rand issued 12,000 shares having a par value of $1 per share and a fair value of $20 per share. Rand was willing to convey these shares because it felt that buildings (ten-year life) were undervalued on Spaulding's records by $60,000 while equipment (five-year life) was undervalued by $25,000. Any excess cost over fair value is assigned to goodwill. Following are the individual financial records for these two companies for the year ended December 31, 2009. Rand Spaulding Corp. Inc. Revenues 372,000 108,000 Expenses 264,000 72,000 Equity in Sub Earnings 25,000 Net Income 133,000 36,000 R/E, 1/1/09 765,000 102,000 Net Income 133,000 36,000 Dividends (84,000) (23,000) R/E, 12/31/09 814,000 115,000 Current assets 150,000 22,000 Investment in Spaulding 242,000 Buildings (net) 525,000 85,000 Equipment (net) 389,250 96,000 Total Assets 1,306,250 203,000 Liabilities 82,250 50,000 Common Stock 360,000 38,000 Additional Paid-in Capital 50,000 0 R/E, 12/31/09 814,000 115,000 Total liabilities& Stockholders