the outstanding common stock of Spaulding Inc. 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 consideration transferred over fair value of identified net assets acquired is assigned to goodwill.

Following are the individual financial records for these two companies for the year ended December 31, 2022.

	Rand Corp.				Spaulding Inc.
Revenues	$	372,000			$	108,000
Expenses		(264,000	)			(72,000	)
Equity in subsidiary earnings		25,000				0
Net income	$	133,000			$	36,000
Retained earnings, January 1, 2022	$	765,000			$	102,000
Net income (above)		133,000				36,000
Dividends paid		(84,000	)			(24,000	)
Retained earnings, December 31, 2022	$	814,000			$	114,000
Current assets	$	150,000			$	22,000
Investment in Spaulding Inc.		242,000				0
Buildings (net)		525,000				85,000
Equipment (net)		389,250				129,000
Total assets	$	1,306,250			$	236,000
Liabilities	$	82,250			$	50,000
Common stock		360,000				72,000
Additional paid-in capital		50,000				0
Retained earnings, December 31, 2022 (above)		814,000				114,000
Total liabilities and stockholders' equity	$	1,306,250			$	236,000

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