On January 1, 2017, Holland Corporation paid $8 per share to a group of Zeeland Corporation shareholders to acquire 60,000 shares of Zeeland's outstanding voting stock, representing a 60 percent ownership interest. The remaining 40,000 shares of Zeeland continued to trade in the market close to its recent average of $6.00 per share both before and after the acquisition by Holland. Zeeland's acquisition date balance sheet follows: Current assets Property and equipment (net) Patents $ 16,300 250, 300 219,900 $ 486,500 Liabilities Common stock Retained earnings $ 246,500 100,000 140,000 $ 486,500 On January 1, 2017, Holland assessed the carrying amount of Zeeland's equipment (5-year remaining life) to be undervalued by $44.000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $307,400. Zeeland's acquisition-date fair values for its current assets and liabilities were equal to their carrying amounts. Any remaining excess of Zeeland's acquisition-date fair value over its book value was attributed to goodwill. The companies' financial statements for the year ending December 31, 2018, follow: $ Sales Cost of goods sold Depreciation expense Amortization expense Other operating expenses Equity in Zeeland earnings Separate company net income Holland (512,400) 260,000 64,000 16,300 61,200 (56, 076) (166,976) Zeeland $ (451,500) 211,500 31,700 18,700 56,600 $ $ (133,600) $ Retained earnings 1/1 Net income Dividends declared Retained earnings 12/31 (822,500) (166,976) 50,000 (939,476) $ (358,600) (133,000) 30,000 $ (461,600) $ Separate company net income $ (166,976) $ (133,000) $ Retained earnings 1/1 Net income Dividends declared Retained earnings 12/31 (822,500) (166,976) 50,000 (939,476) $ (358,600) (133,000) 30,000 $ (461,600) $ $ 104,500 Current assets Investment in Zeeland Property and equipment (net) Patents Total assets $ 127,300 625,512 860,000 153,600 $ 1,766,412 282,000 179,500 566,000 $ $ (4,400) Liabilities Common stock - Holland Common stock - Zeeland Retained earnings 12/31 Total liabilities and owners equity $ (506,936) (320,000) 0 (939,476) $(1,766,412) (100,000) (461,600) $ (566,000) At year-end, there were no intra-entity receivables or payables. a. Compute the amount of goodwill recognized in Holland's acquisition of Zeeland and the allocation of goodwill to the controlling and noncontrolling interest. b. Show how Holland determined its December 31, 2018, Investment in Zeeland account balance. c. Prepare a worksheet to determine the amounts that should appear on Holland's December 31, 2018, consolidated financial statements. Req A and B Reqc a. Compute the amount of goodwill recognized in Holland's acquisition of Zeeland and the allocation of goodwill to the controlling and noncontrolling interest. b. Show how Holland determined its December 31, 2018, Investment in Zeeland account balance. Amount a1. Goodwill Controlling Interest NCI a2. Goodwill allocation Amount b. Investment in Zeeland 12/31/18 Debit Credit Interest Totals Holland Zeeland $ (512,400) $ (451,500) 260,000 211,500 64,000 31,700 16,300 18,700 61,200 56,600 (56,076) 0 $ (166,976)| $ (133,000) Accounts Sales Cost of goods sold Depreciation expense Amortization expense Other operating expenses Equity in Zeeland earnings Separate company net income Consolidated net income Noncontrolling interest in CNI Controlling interest net income Retained earnings, 1/1/18 Net income Dividends declared Retained earnings, 12/31 Current assets Investment in Zeeland, Inc Property and equipment (net) Patents Goodwill Total assets Liabilities Common stock Noncontrolling interest Retained earnings, 12/31 Total liabilities and equities $ (822,500) $ (166,976) 50,000 $ (939,476) $ $ 127,300 $ 625,512 860,000 153,600 0 $ 1,766,412 $ (506,936) (320,000) (358,600) (133,000) 30,000 (461,600) 104,500 0 282,000 179,500 0 566,000 (4,400) (100,000) (939,476) $ (1,766,412) (461,600) (566,000) $ $ 0 $
