Maurice Tutor
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On January 1, 2009, Rand Corp. issued shares of its common stock to acquire all of the outstanding common stock of Spaulding Inc. SpauldingAc€?cs book value was only $140,000 at the time, but Rand issued 12,000 share 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 SpauldingAc€?cs 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 good will.
Following are the individual financial records for these two companies for the year ended December 31, 2012.
| Â |
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 |
| Â | Â | Â |
|
Retained earnings January 1, 2012 |
$765,000 |
102,000 |
|
Net income (above) |
133,000 |
36,000 |
|
Dividends paid |
(84,000) |
(24,000) |
|
Retained earnings, December 31, 2012 |
$814,000 |
114,000 |
| Â | Â | Â |
|
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 |
| Â | Â | Â |
|
Liabilities |
$82,250 |
$50,000 |
|
Common stock |
360,000 |
72,000 |
|
Additional paid-in capital |
50,000 |
0 |
|
Retained earnings, December 31, 2012 (above) |
814,000 |
114,000 |
|
Total liabilities and stockholdersAc€?c equity |
$1,306,250 |
$236,000 |
Required:
Prepare a consolidation worksheet for this business combination.