Question
On January 1, 2020, Holland Corporation paid $7 per share to a group of Zeeland Corporation shareholders to acquire 60,000 shares of Zeelands outstanding voting
On January 1, 2020, Holland Corporation paid $7 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 $5.00 per share both before and after the acquisition by Holland. Zeelands acquisition date balance sheet follows:
Current assets | $ | 14,700 | Liabilities | $ | 222,500 | ||
Property and equipment (net) | 208,700 | Common stock | 100,000 | ||||
Patents | 199,100 | Retained earnings | 100,000 | ||||
$ | 422,500 | $ | 422,500 | ||||
On January 1, 2020, Holland assessed the carrying amount of Zeelands equipment (5-year remaining life) to be undervalued by $62,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $226,900. Zeelands acquisition-date fair values for its current assets and liabilities were equal to their carrying amounts. Any remaining excess of Zeelands acquisition-date fair value over its book value was attributed to goodwill.
The companies financial statements for the year ending December 31, 2021, follow:
Holland ZeelandSales$(722,400) $(435,500)Cost of goods sold 366,300 203,500 Depreciation expense 90,500 33,300 Amortization expense 14,700 20,300 Other operating expenses 54,800 61,400 Equity in Zeeland earnings (49,146) 0 Separate company net income$(245,246) $(117,000) Retained earnings 1/1$(820,900) $(315,400)Net income (245,246) (117,000)Dividends declared 50,000 30,000 Retained earnings 12/31$(1,016,146) $(402,400) Current assets$125,700 $88,500 Investment in Zeeland 559,332 0 Property and equipment (net) 844,000 266,000 Patents 150,400 154,500 Total assets$1,679,432 $509,000 Liabilities$(343,286) $(6,600)Common stockHolland (320,000) 0 Common stockZeeland 0 (100,000)Retained earnings 12/31 (1,016,146) (402,400)Total liabilities and owners equity$(1,679,432) $(509,000)
At year-end, there were no intra-entity receivables or payables.
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Prepare a worksheet to determine the amounts that should appear on Hollands December 31, 2021, consolidated financial statements.
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