On January 1, 2017, Holland Corporation paid $8 per share to a group of Zeeland Corporation

shareholders to acquire 60,000 shares of Zeelands 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 $6.50 per share both before and after the acquisition by Holland.

Zeelands acquisition date balance sheet follows:

Current assets $ 14,000 Liabilities $ 212,000

Property and equipment (net) 268,000 Common stock 100,000

Patents 190,000 Retained earnings 160,000

$472,000 $472,000

On January 1, 2017, Holland assessed the carrying amount of Zeelands equipment (5-year

remaining life) to be undervalued by $55,000. Holland also determined that Zeeland possessed

Consideration transferred by Parflex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $344,000

10% noncontrolling interest fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,000

Fair value of Eagle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380,000

Book value of Eagle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324,000

Excess fair over book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,000

to equipment (undervalued, remaining life of 9 years) . . . . . . . . . . . . . . . 18,000

to goodwill (indefinite life) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 38,000

unrecorded patents (10-year remaining life) worth $285,000. Zeelands acquisition-date fair values

for its current assets and liabilities were equal to their carrying amounts. Any remaining excess of

Zeelands acquisition-date fair value over its book value was attributed to goodwill.

The companies financial statements for the year ending December 31, 2018, follow:

Holland Zeeland

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (640,500) $(428,500)

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325,000 200,000

Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000 34,000

Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,000 21,000

Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . 52,000 63,500

Equity in Zeeland earnings . . . . . . . . . . . . . . . . . . . . . . .(42,300) 0

Separate company net income . . . . . . . . . . . . . . . . . $ (211,800) $(110,000)

Retained earnings 1/1 . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (820,200) $(296,500)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (211,800) (110,000)

Dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 30,000

Retained earnings 12/31 . . . . . . . . . . . . . . . . . . . . . . $ (982,000) $(376,500)

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 125,000 $ 81,500

Investment in Zeeland . . . . . . . . . . . . . . . . . . . . . . . . . . . 562,500 0

Property and equipment (net) . . . . . . . . . . . . . . . . . . . . 837,000 259,000

Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,000 147,500

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,673,500 $ 488,000

Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (371,500) $ (11,500)

Common stock - Holland . . . . . . . . . . . . . . . . . . . . . . . . (320,000) 0

Common stock - Zeeland . . . . . . . . . . . . . . . . . . . . . . . . 0 (100,000)

Retained earnings 12/31 . . . . . . . . . . . . . . . . . . . . . . . . (982,000) (376,500)

Total liabilities and owners equity . . . . . . . . . . . . . . . $(1,673,500) $(488,000)

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

a. Compute the amount of goodwill recognized in Hollands 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 Hollands December 31,

2018, consolidated financial statements.