Question
On January 1, 2020, Holland Corporation paid $9 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 $9 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 $7.50 per share both before and after the acquisition by Holland. Zeelands acquisition date balance sheet follows:
Current assets | $ | 14,100 | Liabilities | $ | 213,500 | ||
Property and equipment (net) | 308,100 | Common stock | 100,000 | ||||
Patents | 191,300 | Retained earnings | 200,000 | ||||
$ | 513,500 | $ | 513,500 | ||||
On January 1, 2020, Holland assessed the carrying amount of Zeelands equipment (5-year remaining life) to be undervalued by $56,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $290,200. 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 | Zeeland | ||||||
Sales | $ | (652,200 | ) | $ | (429,500 | ) | |
Cost of goods sold | 330,900 | 200,500 | |||||
Depreciation expense | 81,500 | 33,900 | |||||
Amortization expense | 14,100 | 20,900 | |||||
Other operating expenses | 52,400 | 63,200 | |||||
Equity in Zeeland earnings | (42,468 | ) | 0 | ||||
Separate company net income | $ | (215,768 | ) | $ | (111,000 | ) | |
Retained earnings 1/1 | $ | (820,300 | ) | $ | (299,200 | ) | |
Net income | (215,768 | ) | (111,000 | ) | |||
Dividends declared | 50,000 | 30,000 | |||||
Retained earnings 12/31 | $ | (986,068 | ) | $ | (380,200 | ) | |
Current assets | $ | 125,100 | $ | 82,500 | |||
Investment in Zeeland | 599,856 | 0 | |||||
Property and equipment (net) | 838,000 | 260,000 | |||||
Patents | 149,200 | 148,500 | |||||
Total assets | $ | 1,712,156 | $ | 491,000 | |||
Liabilities | $ | (406,088 | ) | $ | (10,800 | ) | |
Common stockHolland | (320,000 | ) | 0 | ||||
Common stockZeeland | 0 | (100,000 | ) | ||||
Retained earnings 12/31 | (986,068 | ) | (380,200 | ) | |||
Total liabilities and owners equity | $ | (1,712,156 | ) | $ | (491,000 | ) | |
At year-end, there were no intra-entity receivables or payables.
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Compute the amount of goodwill recognized in Hollands acquisition of Zeeland and the allocation of goodwill to the controlling and noncontrolling interest.
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Show how Holland determined its December 31, 2021, Investment in Zeeland account balance.
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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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