On January 1, 2020, 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 $6.50 per share both before and after the acquisition by Holland. Zeeland's acquisition date balance sheet follows: Current assets Property and equipment (net) Patents $ 15,400 269,400 208, 200 $ 493,000 Liabilities Common stock Retained earnings $ 233,000 100,000 160,000 $ 493,000 On January 1, 2020, Holland assessed the carrying amount of Zeeland's equipment (5-year remaining life) to be undervalued by $53,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $327,200. 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, 2021, follow: $ Sales Cost of goods sold Depreciation expense Amortization expense Other operating expenses Equity in Zeeland earnings Separate company net income Holland (617,700) 313,100 77,500 15,400 57,600 (48,408) (202,508) Zeeland $ (442,500) 207,000 32,600 19,600 59,300 0 $ $ (124,000) $ Retained earnings 1/1 Net income Dividends declared Retained earnings 12/31 (821,600) (202,508) 50,000 (974,108) $ (334,300) (124,000) 30,000 $ (428,300) $ Current assets Investment in Zeeland Property and equipment (net) Patents $ 126,400 588,996 851,000 151,800 $ 1,718, 196 $ 95,500 0 273,000 161,500 $ 530,000 Total assets Liabilities Common stock-Holland Common stock-Zeeland Retained earnings 12/31 Total liabilities and owners equity $ (424,088) (320,000) 0 (974,108) $(1,718,196) $ (1,700) 0 (100,000) (428,300) $ (530,000) 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, 2021, Investment in Zeeland account balance. c. Prepare a worksheet to determine the amounts that should appear on Holland's December 31, 2021, consolidated financial statements. Amount a1. Goodwill Controlling Interest NCI a2. Goodwill allocation Amount b. $ 480,000 Initial Value Change in Zeeland's RE Excess amortization (51,984) $ 428,016 Investment in Zeeland Noncontrolling Interest Accounts Consolidation Worksheet For Year Ending December 31, 2021 Consolidation Entries Holland Zeeland Debit Credit $ (617,700) $ (442,500) 313,100 207,000 77,500 32,600 10,600 15,400 19,600 32,720 57,600 59,300 (48,408) 0 48,408 $ (202,508) $ (124,000) Consolidated Totals $ (1,060,200) 520,100 120,700 67,720 116,900 0 $ 32,272 X 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 Net income Dividends declared Retained earnings 12/31 Current assets Investment in Zeeland, Inc Property and equipment (net) Patents $ (234,780) X 32,272 (202,508) X (821,600) (202,508) $ 334,300 124,000 X $ (821,600) (202,508) 50,000 $ (974,108) $ (334,300) (124,000) 30,000 $ (428,300) $ 95,500 18,000 12,000 $ 974,108 $ 126,400 588,996 0 851,000 273,000 161,500 151,800 Goodwill 0 0 Total assets $ 1,718,196 $ 530,000 Liabilities (424,088) (320,000) (1,700) (100,000) Common stock Noncontrolling interest Retained earnings 12/31 (974,108) $ (1,718,196) (428,300) $ (530,000) Total liabilities and equities $ 582,300 $ 18,000
