1)

The Holtz Corporation acquired 80 percent of the 100,000 outstanding voting shares of

Devine, Inc., for $7.20 per share on January 1, 2014. The remaining 20 percent of Devines

shares also traded actively at $7.20 per share before and after Holtzs acquisition. An appraisal

made on that date determined that all book values appropriately reflected the fair values of

Devines underlying accounts except that a building with a 5-year future life was undervalued

by $85,500 and a fully amortized trademark with an estimated 10-year remaining life had a

$64,000 fair value. At the acquisition date, Devine reported common stock of $100,000 and

a retained earnings balance of $226,500.

LO 4-5, 4-6, 4-7

Consolidated Financial Statements and Outside Ownership 195

Following are the separate financial statements for the year ending December 31, 2015:

Holtz

Corporation

Devine,

Inc.

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (641,000) $(399,000)

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198,000 176,000

Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273,000 126,000

Dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,000) 0

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (186,000) $ (97,000)

Retained earnings, 1/1/15 . . . . . . . . . . . . . . . . . . . . . . . . $ (762,000) $(296,500)

Net income (above) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (186,000) (97,000)

Dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,000 20,000

Retained earnings, 12/31/15 . . . . . . . . . . . . . . . . . . . . . . $ (878,000) $(373,500)

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 121,000 $ 120,500

Investment in Devine, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 576,000 0

Buildings and equipment (net) . . . . . . . . . . . . . . . . . . . . 887,000 335,000

Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,000 236,000

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,733,000 $ 691,500

Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (535,000) $(218,000)

Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (320,000) (100,000)

Retained earnings, 12/31/15 (above) . . . . . . . . . . . . . . . . (878,000) (373,500)

Total liabilities and equities . . . . . . . . . . . . . . . . . . . . . $(1,733,000) $(691,500)

At year-end, there were no intra-entity receivables or payables.

a. Prepare a worksheet to consolidate these two companies as of December 31, 2015.

b. Prepare a 2015 consolidated income statement for Holtz and Devine.

c. If instead the noncontrolling interest shares of Devine had traded for $4.76 surrounding

Holtzs acquisition date, what is the impact on goodwill?