Problem 4-25 (Static) (LO 4-3, 4-5, 4-7)

On January 1, 2023, 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 $6.50 per share both before and after the acquisition by Holland. Zeelands acquisition date balance sheet follows:

Current assets	$ 14,000	Liabilities	$ 212,000
Property and equipment (net)	268,000	Common stock	100,000
Patents	190,000	Retained earnings	160,000
	$ 472,000		$ 472,000

On January 1, 2023, Holland assessed the carrying amount of Zeelands equipment (5-year remaining life) to be undervalued by $55,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $285,000. 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, 2024, follow:

Account	Holland	Zeeland
Sales	$ (640,500)	$ (428,500)
Cost of goods sold	325,000	200,000
Depreciation expense	80,000	34,000
Amortization expense	14,000	21,000
Other operating expenses	52,000	63,500
Equity in Zeeland earnings	(42,300)	0
Separate company net income	$ (211,800)	$ (110,000)
Retained earnings, 1/1	$ (820,200)	$ (296,500)
Net income	(211,800)	(110,000)
Dividends declared	50,000	30,000
Retained earnings, 12/31	$ (982,000)	$ (376,500)
Current assets	$ 125,000	$ 81,500
Investment in Zeeland	562,500	0
Property and equipment (net)	837,000	259,000
Patents	149,000	147,500
Total assets	$ 1,673,500	$ 488,000
Liabilities	$ (371,500)	$ (11,500)
Common stockHolland	(320,000)	0
Common stockZeeland	0	(100,000)
Retained earnings, 12/31	(982,000)	(376,500)
Total liabilities and owners' equity	$ (1,673,500)	$ (488,000)

At year-end, there were no intra-entity receivables or payables.

Required:

a1. Compute the amount of goodwill recognized in Hollands acquisition of Zeeland.

a2. Show the allocation of goodwill to the controlling and noncontrolling interest.

b. Show how Holland determined its December 31, 2024, Investment in Zeeland account balance.

c. Prepare a worksheet to determine the amounts that should appear on Hollands December 31, 2024, consolidated financial statements.

\begin{tabular}{|l|l|l|} \hline \multicolumn{2}{|l|}{} & \multicolumn{1}{|c|}{ Amount } \\ \hline a1. Goodwill & Controlling Interest & Noncontrollinginterest \\ \hline a2. Goodwill allocation & & \\ \hline & & Amount \\ \hline b. Initial Value & \\ \hline b. Change in Zeeland's Retained earnings & \\ \hline b. Excess amortization & \\ \hline b. Investment in Zeeland & $ \\ \hline \end{tabular} HOLLAND CORPORATION AND ZEELAND CORPORATION Consolidation Worksheet For Year Ending December 31, 2024