On December 31, 2010, Palm Corporation issued 10,000 shares of its $10 par commons stock (current fair value $50 a share) to stockholders of Starr Company for all the outstanding $5 par common stock of Starr. There was no contingent consideration. Out of pocket costs of the business combination paid by Palm on December 31, 2010, consisted of: finder's and legal fees, $50,000; and costs associated with the SEC registration statement for Palm common stock $30,000. Both companies use the same accounting principles and procedures. The effective income tax rate for each company was 40%, but you may ignore income tax effects. Financial statements of Palm Corporation and Starr Company for the year ended December 31, 2010, prior to the consummation of a purchase type business combination, follow Palm Corporation and Starr Company Separate Financial Statements (Prior to parchase-type business combination) For Year Ended December 31, 2010 Palm Corp. Starr Co. Balance Sheets Assets Cash Inventories Other Current Assets Receivable from Starr Co. Plant Assets - Net Patent (Net) 120,000 140,000 100,000 30,000 500,000 35,000 120,000 85,000 250,000 25,000 890,0005 000 515,000 890,000 Total Assets Liabilities and Stockholders' Equity Payable to Palm Corporation Income Taxes Payable Other Liabilities Common Stock, $10 par Common Stock, $5 par Additional Paid in Capital Retained Earnings 25,000 367,000 300,000 30,000 10,000 95,000 50,000 148,000 200,000 60,000 120,000 Total Liabilities and Stockholders' Equity 890,000 -15 - 515,000