On January 1, 2020, 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 $7.00 per share both before and after the acquisition by Holland. Zeelands acquisition date balance sheet follows:

On January 1, 2020, Holland assessed the carrying amount of Zeelands equipment (5-year remaining life) to be undervalued by $52,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $360,000. 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, 2021, follow:

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, 2021, Investment in Zeeland account balance.

C. Prepare a worksheet to determine the amounts that should appear on Hollands December 31, 2021, consolidated financial statements.

Required A and B

Required C.

\begin{tabular}{|c|c|c|c|c|} \hline & \multicolumn{2}{|r|}{ Holland } & \multicolumn{2}{|r|}{ Zeeland } \\ \hline Sales & $ & (606,000) & $ & (443,500) \\ \hline Cost of goods sold & & 307,200 & & 207,500 \\ \hline Depreciation expense & & 76,000 & & 32,500 \\ \hline Amortization expense & & 15,500 & & 19,500 \\ \hline Other operating expenses & & 58,000 & & 59,000 \\ \hline Equity in Zeeland earnings & & (47,160) & & 0 \\ \hline Separate company net income & $ & (196,460) & & (125,000) \\ \hline Retained earnings 1/1 & $ & (821,700) & $ & (337,000) \\ \hline Net income & & (196,460) & & (125,000) \\ \hline Dividends declared & & 50,000 & & 30,000 \\ \hline Retained earnings 12/31 & $ & (968,160) & & (432,000) \\ \hline Current assets & $ & 126,500 & $ & 96,500 \\ \hline Investment in Zeeland & & 575,520 & & 0 \\ \hline Property and equipment (net) & & 852,000 & & 274,000 \\ \hline Patents & & 152,000 & & 166,500 \\ \hline Total assets & & 1,706,020 & $ & 537,000 \\ \hline Liabilities & $ & (417,860) & $ & (5,000) \\ \hline Common stock-Holland & & (320,000) & & 0 \\ \hline Common stock-Zeeland & & 0 & & (100,000) \\ \hline Retained earnings 12/31 & & (968,160) & & (432,000) \\ \hline Total liabilities and owners equity & & 1,706,020) & & (537,000) \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|c|c|} \hline Current assets & $ & 15,500 & Liabilities & $ & 234,500 \\ \hline Property and equipment (net) & & 289,500 & Common stock & & 100,000 \\ \hline Patents & & 209,500 & Retained earnings & & 180,000 \\ \hline & $ & 514,500 & & $ & 514,500 \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|c|c|c|} \hline \multicolumn{7}{|c|}{ HOLLAND CORPORATION AND ZEELAND CORPORATION } \\ \hline \multicolumn{7}{|c|}{ Consolidation Worksheet } \\ \hline \multicolumn{7}{|c|}{ For Year Ending December 31, 2021} \\ \hline \multirow[b]{2}{*}{ Accounts } & \multirow[b]{2}{*}{ Holland } & \multirow[b]{2}{*}{ Zeeland } & \multicolumn{2}{|c|}{ Consolidation Entries } & Noncontrolling & Consolidated \\ \hline & & & Debit & Credit & Interest & Totals \\ \hline \end{tabular} \begin{tabular}{|l|l|l|l|} \hline a1. & Goodwill & Amount \\ \hline & \multicolumn{2}{|c|}{ Controlling Interest } & NCl \\ \hline a2. & Goodwill allocation & & \\ \hline & & Amount \\ \hline b. & Initial Value & \\ \hline & Change in Zeeland's RE & \\ \hline & Excess amortization & \\ \hline & Investment in Zeeland & $ \\ \hline \hline \end{tabular} \begin{tabular}{|c|c|c|c|c|c|c|c|c|} \hline Sales & $ & (606,000) & $ & (443,500) & & & & \\ \hline Cost of goods sold & & 307,200 & & 207,500 & & & & \\ \hline Depreciation expense & & 76,000 & & 32,500 & & & & \\ \hline Amortization expense & & 15,500 & & 19,500 & & & & \\ \hline Other operating expenses & & 58,000 & & 59,000 & & & & \\ \hline Equity in Zeeland earnings & & (47,160) & & 0 & & & & \\ \hline Separate company net income & $ & (196,460) & $ & (125,000) & & & & \\ \hline \multicolumn{9}{|l|}{ Consolidated net income } \\ \hline \multicolumn{9}{|l|}{ Noncontrolling interest in CNI} \\ \hline \multicolumn{9}{|l|}{ Controlling interest net income } \\ \hline Retained earnings 1/1 & $ & (821,700) & $ & (337,000) & & & & \\ \hline Net income & & (196,460) & & (125,000) & & & & \\ \hline Dividends declared & & 50,000 & & 30,000 & & & & \\ \hline Retained earnings 12/31 & $ & (968,160) & $ & (432,000) & & & & \\ \hline Current assets & $ & 126,500 & & 96,500 & & & & \\ \hline Investment in Zeeland, Inc & & 575,520 & & 0 & & & & \\ \hline Property and equipment (net) & & 852,000 & & 274,000 & & & & \\ \hline Patents & & 152,000 & & 166,500 & & & & \\ \hline Goodwill & & 0 & & 0 & & & & \\ \hline Total assets & $ & 1,706,020 & $ & 537,000 & & & & \\ \hline Liabilities & & (417,860) & & (5,000) & & & & \\ \hline Common stock & & (320,000) & & (100,000) & & & & \\ \hline \multicolumn{9}{|l|}{ Noncontrolling interest } \\ \hline Retained earnings 12/31 & & (968,160) & & (432,000) & & & & \\ \hline Total liabilities and equities & & (1,706,020) & $ & (537,000) & $ & $ & & \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|c|} \hline & \multicolumn{2}{|r|}{ Holland } & \multicolumn{2}{|r|}{ Zeeland } \\ \hline Sales & $ & (606,000) & $ & (443,500) \\ \hline Cost of goods sold & & 307,200 & & 207,500 \\ \hline Depreciation expense & & 76,000 & & 32,500 \\ \hline Amortization expense & & 15,500 & & 19,500 \\ \hline Other operating expenses & & 58,000 & & 59,000 \\ \hline Equity in Zeeland earnings & & (47,160) & & 0 \\ \hline Separate company net income & $ & (196,460) & & (125,000) \\ \hline Retained earnings 1/1 & $ & (821,700) & $ & (337,000) \\ \hline Net income & & (196,460) & & (125,000) \\ \hline Dividends declared & & 50,000 & & 30,000 \\ \hline Retained earnings 12/31 & $ & (968,160) & & (432,000) \\ \hline Current assets & $ & 126,500 & $ & 96,500 \\ \hline Investment in Zeeland & & 575,520 & & 0 \\ \hline Property and equipment (net) & & 852,000 & & 274,000 \\ \hline Patents & & 152,000 & & 166,500 \\ \hline Total assets & & 1,706,020 & $ & 537,000 \\ \hline Liabilities & $ & (417,860) & $ & (5,000) \\ \hline Common stock-Holland & & (320,000) & & 0 \\ \hline Common stock-Zeeland & & 0 & & (100,000) \\ \hline Retained earnings 12/31 & & (968,160) & & (432,000) \\ \hline Total liabilities and owners equity & & 1,706,020) & & (537,000) \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|c|c|} \hline Current assets & $ & 15,500 & Liabilities & $ & 234,500 \\ \hline Property and equipment (net) & & 289,500 & Common stock & & 100,000 \\ \hline Patents & & 209,500 & Retained earnings & & 180,000 \\ \hline & $ & 514,500 & & $ & 514,500 \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|c|c|c|} \hline \multicolumn{7}{|c|}{ HOLLAND CORPORATION AND ZEELAND CORPORATION } \\ \hline \multicolumn{7}{|c|}{ Consolidation Worksheet } \\ \hline \multicolumn{7}{|c|}{ For Year Ending December 31, 2021} \\ \hline \multirow[b]{2}{*}{ Accounts } & \multirow[b]{2}{*}{ Holland } & \multirow[b]{2}{*}{ Zeeland } & \multicolumn{2}{|c|}{ Consolidation Entries } & Noncontrolling & Consolidated \\ \hline & & & Debit & Credit & Interest & Totals \\ \hline \end{tabular} \begin{tabular}{|l|l|l|l|} \hline a1. & Goodwill & Amount \\ \hline & \multicolumn{2}{|c|}{ Controlling Interest } & NCl \\ \hline a2. & Goodwill allocation & & \\ \hline & & Amount \\ \hline b. & Initial Value & \\ \hline & Change in Zeeland's RE & \\ \hline & Excess amortization & \\ \hline & Investment in Zeeland & $ \\ \hline \hline \end{tabular} \begin{tabular}{|c|c|c|c|c|c|c|c|c|} \hline Sales & $ & (606,000) & $ & (443,500) & & & & \\ \hline Cost of goods sold & & 307,200 & & 207,500 & & & & \\ \hline Depreciation expense & & 76,000 & & 32,500 & & & & \\ \hline Amortization expense & & 15,500 & & 19,500 & & & & \\ \hline Other operating expenses & & 58,000 & & 59,000 & & & & \\ \hline Equity in Zeeland earnings & & (47,160) & & 0 & & & & \\ \hline Separate company net income & $ & (196,460) & $ & (125,000) & & & & \\ \hline \multicolumn{9}{|l|}{ Consolidated net income } \\ \hline \multicolumn{9}{|l|}{ Noncontrolling interest in CNI} \\ \hline \multicolumn{9}{|l|}{ Controlling interest net income } \\ \hline Retained earnings 1/1 & $ & (821,700) & $ & (337,000) & & & & \\ \hline Net income & & (196,460) & & (125,000) & & & & \\ \hline Dividends declared & & 50,000 & & 30,000 & & & & \\ \hline Retained earnings 12/31 & $ & (968,160) & $ & (432,000) & & & & \\ \hline Current assets & $ & 126,500 & & 96,500 & & & & \\ \hline Investment in Zeeland, Inc & & 575,520 & & 0 & & & & \\ \hline Property and equipment (net) & & 852,000 & & 274,000 & & & & \\ \hline Patents & & 152,000 & & 166,500 & & & & \\ \hline Goodwill & & 0 & & 0 & & & & \\ \hline Total assets & $ & 1,706,020 & $ & 537,000 & & & & \\ \hline Liabilities & & (417,860) & & (5,000) & & & & \\ \hline Common stock & & (320,000) & & (100,000) & & & & \\ \hline \multicolumn{9}{|l|}{ Noncontrolling interest } \\ \hline Retained earnings 12/31 & & (968,160) & & (432,000) & & & & \\ \hline Total liabilities and equities & & (1,706,020) & $ & (537,000) & $ & $ & & \\ \hline \end{tabular}