November 11, 2022On 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 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, 2014. December 31, 2014. Revenues Expenses Equity in subsidiary earnings Net income Retained earnings, January 1, 2014 Net income (above) Dividends paid Retained earnings, December 31, 2014 Current assets Investment in Spaulding Inc. Buildings (net) Equipment (net) Total assets Liabilities Common stock Additional paid-in capital Retained earnings, December 31, 2014 (above) Total liabilities and stockholders' equity Required: Rand Corp. $ 372,000 (264,000) 25,000 $ 133,000 $ 765,000 133,000 (84,000) $814,000 $ 150,000 242,000 525,000 389,250 $1,306,250 $ 82,250 360,000 50,000 814,000 $1,306,250 Spaulding Inc. $108,000 (72,000) 0 $ 36,000 $102,000 36,000 (24,000) $114,000 $ 22,000 0 85,000 129,000 $236,000 $ 50,000 72,000 0 114,000 $236,000 Prepare a consolidation worksheet for this business combination.
November 11, 2022On 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 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, 2014. December 31, 2014. Revenues Expenses Equity in subsidiary earnings Net income Retained earnings, January 1, 2014 Net income (above) Dividends paid Retained earnings, December 31, 2014 Current assets Investment in Spaulding Inc. Buildings (net) Equipment (net) Total assets Liabilities Common stock Additional paid-in capital Retained earnings, December 31, 2014 (above) Total liabilities and stockholders' equity Required: Rand Corp. $ 372,000 (264,000) 25,000 $ 133,000 $ 765,000 133,000 (84,000) $814,000 $ 150,000 242,000 525,000 389,250 $1,306,250 $ 82,250 360,000 50,000 814,000 $1,306,250 Spaulding Inc. $108,000 (72,000) 0 $ 36,000 $102,000 36,000 (24,000) $114,000 $ 22,000 0 85,000 129,000 $236,000 $ 50,000 72,000 0 114,000 $236,000 Prepare a consolidation worksheet for this business combination.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:November 11, 2022On 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 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,
2014.
December 31, 2014.
Revenues
Expenses
Equity in subsidiary earnings
Net income
Retained earnings, January 1, 2014
Net income (above)
Dividends paid
Retained earnings, December 31, 2014
Current assets
Investment in Spaulding Inc.
Buildings (net)
Equipment (net)
Total assets
Liabilities
Common stock
Additional paid-in capital
Retained earnings, December 31, 2014 (above)
Total liabilities and stockholders' equity
Required:
Rand
Corp.
$ 372,000
(264,000)
25,000
$ 133,000
$ 765,000
133,000
(84,000)
$814,000
$ 150,000
242,000
525,000
389,250
$1,306,250
$ 82,250
360,000
50,000
814,000
$1,306,250
Spaulding
Inc.
$108,000
(72,000)
0
$ 36,000
$102,000
36,000
(24,000)
$114,000
$ 22,000
0
85,000
129,000
$236,000
$ 50,000
72,000
0
114,000
$236,000
Prepare a consolidation worksheet for this business combination.
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