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Problem 4-31 (Algo) (LO 4-3, 4-5, 4-7) On January 1, 2020, Holland Corporation paid $9 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 $7.50 per share both before and after the acquisition by Holland. Zeeland's acquisition date balance sheet follows: Current assets Property and equipment (net) Patents $ 16,580 310,500 222,500 $ 549,500 Liabilities Common stock Retained earnings $ 249,500 100,000 200,000 $ 549,500 On January 1, 2020, Holland assessed the carrying amount of Zeeland's equipment (5-year remaining life) to be undervalued by $42,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $398,900. 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 $ (489,000) 248, 200 61,000 16,500 62,000 (52,026) $ (153,326) Zeeland $ (453,500) 212,500 31,500 18,500 56,000 $ (135,000) Retained earnings 1/1 Net income Dividends declared Retained earnings 12/31 $ (822,700) (153,326) 50,000 $ (926,026) $ (364,000) (135,000) 30,000 $ (469,000) Current assets Investment in Zeeland Property and equipment (net) Patents Total assets $ 127,500 643,452 862,000 154,000 $ 1,786,952 $ 106,500 284,000 181,500 $ 572,000 Liabilities Common stock-Holland Common stock-Zeeland Retained earnings 12/31 Total liabilities and owners equity $ (540,926) (320,000) 0 (926, 026) $(1,786,952) $ (3,000) (100,000) (469,000) $ (572,000) Amount a1 Goodwill NCI Controlling Interest 95,460 |a2. 2. Goodwill allocation $ b. Initial Value Change in Zeeland's RE Excess amortization Investment in Zeeland $ 3,640 Amount $ 540,000 161,400 (57,948) $ 643,452 Noncontrolling Interest HOLLAND CORPORATION AND ZEELAND CORPORATION Consolidation Worksheet For Year Ending December 31, 2021 Consolidation Entries Holland Zeeland Debit Credit S (489,000) $ (453,500) 248,200 212,500 61,000 31,500 8,400 16,500 18,500 39,890 62,000 56,000 (52,026) 0 100,316 S (153,326) $ (135,000) Consolidated Totals S (942,500) 460,700 100,900 74,890 118,000 OOO s (188,010) Accounts 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 8 $ (822,700) S (364.000) (153,326) (135,000) 50,000 30,000 S (926,026) S (469,000) $ 127,500 $ 106,500 643,452 0 862,000 284,000 154,000 181,500 O 0 Goodwill Total assets Liabilities Common stock Noncontrolling interest Retained earnings 12/31 Total liabilities and equities $ 1,786,952 (540,926) (320,000) $ 572,000 (3.000) (100.000) (822,700) (153,326) 50,000 (866,026) (926,026) (469.000) S (572,000) 12,000 $ 12,000 (1.786,952) S 148,606