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11/02/2017 ACCT 401/601 bonus test On January 1, 2011, Rand Corp, issued shares of its common stock to acquire all of 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 transf acquired is assigned to goodwill. Following are the individual financial reconds for these two companies for the year ended December 31, 2014. December 31, 2014. Com Spaulding S 372,000 Inc. $108,000 Revenues Expenses (72,000) (264,000) 25.000 Equity in subsidiary earnings Net income Retained earnings, January 1, 2014 s 765,000 133,000 S102,000 36,000 Net income (above) Dividends paid Retained earnings, December 31, 2014 s 150,000 242,000 525,000 Current assets 22,000 Investment in Spaulding Inc. Buildings (net) Equipment (net) Total assets 0 85,000 389.25129.000 S1. 306.250 S236.000 Common stock Additional paid-in capital Retained earnings, December 31, 2014 (above) Total liabilities and stockholders' equity S50,000 72,000 0 -614.000-114,000 S1.306250 $236.000 S 82.250 360,000 50,000

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