On January 1, 2016, Rand Corp issued shares of its common stock for all of the outstanding common stock of Spaulding Inc. This combination was accounted for as an acquisition. Spauldings 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 market value of $20 per share. Rand was willing to convey these shares because it felt that buildings (ten-year life) were undervalued on Spauldings records by $50,000 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, 2019.

Rand Corp. Spaulding

Revenues $ 372,000 $ 108,000

Expenses (264,000) ( 72,000)

Equity in subsidiary earnings 26,000 -0---

Net income $ 134,000 $ 36,000

Retained earnings, January 1, 2019 $ 768,000 $ 102,000

Net income 134,000 36,000

Dividends paid (84,000) (24,000)

Retained earnings, December 31, 2019 $ 818,000 $ 114,000

Current assets $ 150,000 $ 22,000

Investment in Spaulding Inc. 246,000 --0--

Buildings (net) 525,000 85,000

Equipment (net) 389,250 129,000

Total assets $1,310,250 $ 236,000

Liabilities $ 82,250 $ 50,000

Common stock 360,000 72,000

Additional paid in capital 50,000 --0--

Retained earnings, December 31, 2019 818,000 114,000

Total liabilities & stockholders equity $1,310,250 $ 236,000