Problem 4-28 (LO 4-1, 4-5, 4-6) Plaza, Inc., acquires 80 percent of the outstanding common stock of Stanford Corporation on January 1, 2018, in exchange for $1,129,500 cash. At the acquisition date, Stanford's total fair value, including the noncontrolling interest, was assessed at $1,411,875. Also at the acquisition date, Stanford's book value was $579,500. Several individual items on Stanford's financial records had fair values that differed from their book values as follows: Book Value $ 300,400 Tradenames (indefinite life) Property and equipment (net, 8-year remaining life) Patent (14-year remaining life) Fair Value $ 452,800 262,400 173,400 144.000 For internal reporting purposes, Plaza, Inc., employs the equity method to account for this investment. The following account balances are for the year ending December 31, 2018, for both companies. $ $ Plaza (892,400) 493,400 209,200 Revenues Cost of goods sold Depreciation expense Amortization expense Equity in income of Stanford Net income Stanford (754,600) 330,400 30,700 23,300 (292,800) $ (482,600) $ (370,200) Retained earnings, 1/1/18 Net income Dividends declared Retained earnings, 12/31/18 $(1,064,500) (482,600) 250,400 $ (1,296,700) $ (442,300) (370,200) 21,000 $ (791,500) $ $ Current assets Investment in Stanford Tradenames Property and equipment (net) Patents 718,100 1,405,500 200,400 860,100 0 360,700 0 300,400 214,900 120,700 $ 92,500 Current assets Investment in Zeeland Property and equipment (net) Patents Total assets $ 126,100 551,928 848,000 151,200 $ 1,677,228 270.000 158,500 521,000 $ $ (325,224) (320,000) $ (3,800) Liabilities Common stock - Holland Common stock - Zeeland Retained earnings 12/31 Total liabilities and owners equity 0 (1,032,004) $(1,677,228) (100,000) (417,200) $ (521,000) 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, 2018, Investment in Zeeland account balance. c. Prepare a worksheet to determine the amounts that should appear on Holland's December 31, 2018, consolidated financial statements. Complete this question by entering your answers in the tabs below. Req A and B Reqc 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, 2018, Investment in Zeeland account balance. Amount $ 616,450 a1. Goodwill NCI Controlling Interest 95,640 a2. Goodwill allocation $ $ 3,760 a2. Goodwill allocation $ 95,640 $ 3,760 Amount $ 551,928 b. Investment in Zeeland 12/31/18 HOLLAND CORPORATION AND ZEELAND CORPORATION Noncontrolling Interest Consolidated Totals $ (1,201,700) 595,400 142,600 60,460 116,600 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, 1/1/18 Net income Dividends declared Consolidation Worksheet For Year Ending December 31, 2018 Consolidation Entries Holland Zeeland Debit Credit $ (769,200) $ (439,500) 389,900 205,500 96,500 32,900 13,200 15,100 19,900 25,460 56,400 60,200 (49,404) 0 0 49,404 $ (260,704) $ (121,000) (32,960) 326,200 $ (821,300) (260,704) 50,000 $ (326,200) (121,000) 30,000 $ (286,640) 32,960 $ (253,680) $ (821,300) (260,704) 50,000 $ (1,032,004) $ 218,600 18,000 12,000 Retained earnings, 12/31 |(1,032,004) $ (417,200) $ $ Current assets Investment in Zeeland, Inc Property and equipment (net) Patents Goodwill Total assets 126,100 551,928 848,000 151,200 92,500 0 270,000 18,000 52,800 229,140 99,400 413,760 X 13,200 25,460 1,157,600 513,380 99,400 1,988,980 0 0 $ 521,000 $ 1,677,228 $ (74,040) X NCI share of CNI Plaza share of CNI Retained earnings, 1/1 442,300 (1,064,500) (482,600) 250,400 Net income Dividends declared $ (823,200) $ (1,064,500) (482,600) $ (442,300) (370,200) 21,000 24,200 3,200 X Retained earnings, 12/31 $ (791,500) $ 360,700 $ (1,547,100) 1,078,800 |(1,296,700) $ 718,100 1,405,500 200,400 860,100 0 463,600 X 300,400 653,200 229,600 214,900 45,200 X 1 152,400 16,800 29,400 633,775 2,100 120,700 Current assets Investment in Stanford Tradenames Property and equipment (net) Patents Goodwill Total assets Accounts payable Common stock Additional paid-in capital Noncontrolling interest Retained earnings, 12/31 2,100 $ $ $ 3,184,100 (118,600) (250,500) (1,518,300) 996,700 (68,000) (92,000) (45,200) 633,775 2,595,375 (186,600) (250,500) 1,518,300 92,000 45,200 |(1,296,700) (791,500) 1,296,700 X 2,377,900 Total liabilities and equities (3,184,100) $ (996,700) $ 492,000 1,754,075 "Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted. Problem 4-28 (LO 4-1, 4-5, 4-6) Plaza, Inc., acquires 80 percent of the outstanding common stock of Stanford Corporation on January 1, 2018, in exchange for $1,129,500 cash. At the acquisition date, Stanford's total fair value, including the noncontrolling interest, was assessed at $1,411,875. Also at the acquisition date, Stanford's book value was $579,500. Several individual items on Stanford's financial records had fair values that differed from their book values as follows: Book Value $ 300,400 Tradenames (indefinite life) Property and equipment (net, 8-year remaining life) Patent (14-year remaining life) Fair Value $ 452,800 262,400 173,400 144.000 For internal reporting purposes, Plaza, Inc., employs the equity method to account for this investment. The following account balances are for the year ending December 31, 2018, for both companies. $ $ Plaza (892,400) 493,400 209,200 Revenues Cost of goods sold Depreciation expense Amortization expense Equity in income of Stanford Net income Stanford (754,600) 330,400 30,700 23,300 (292,800) $ (482,600) $ (370,200) Retained earnings, 1/1/18 Net income Dividends declared Retained earnings, 12/31/18 $(1,064,500) (482,600) 250,400 $ (1,296,700) $ (442,300) (370,200) 21,000 $ (791,500) $ $ Current assets Investment in Stanford Tradenames Property and equipment (net) Patents 718,100 1,405,500 200,400 860,100 0 360,700 0 300,400 214,900 120,700 $ 92,500 Current assets Investment in Zeeland Property and equipment (net) Patents Total assets $ 126,100 551,928 848,000 151,200 $ 1,677,228 270.000 158,500 521,000 $ $ (325,224) (320,000) $ (3,800) Liabilities Common stock - Holland Common stock - Zeeland Retained earnings 12/31 Total liabilities and owners equity 0 (1,032,004) $(1,677,228) (100,000) (417,200) $ (521,000) 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, 2018, Investment in Zeeland account balance. c. Prepare a worksheet to determine the amounts that should appear on Holland's December 31, 2018, consolidated financial statements. Complete this question by entering your answers in the tabs below. Req A and B Reqc 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, 2018, Investment in Zeeland account balance. Amount $ 616,450 a1. Goodwill NCI Controlling Interest 95,640 a2. Goodwill allocation $ $ 3,760 a2. Goodwill allocation $ 95,640 $ 3,760 Amount $ 551,928 b. Investment in Zeeland 12/31/18 HOLLAND CORPORATION AND ZEELAND CORPORATION Noncontrolling Interest Consolidated Totals $ (1,201,700) 595,400 142,600 60,460 116,600 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, 1/1/18 Net income Dividends declared Consolidation Worksheet For Year Ending December 31, 2018 Consolidation Entries Holland Zeeland Debit Credit $ (769,200) $ (439,500) 389,900 205,500 96,500 32,900 13,200 15,100 19,900 25,460 56,400 60,200 (49,404) 0 0 49,404 $ (260,704) $ (121,000) (32,960) 326,200 $ (821,300) (260,704) 50,000 $ (326,200) (121,000) 30,000 $ (286,640) 32,960 $ (253,680) $ (821,300) (260,704) 50,000 $ (1,032,004) $ 218,600 18,000 12,000 Retained earnings, 12/31 |(1,032,004) $ (417,200) $ $ Current assets Investment in Zeeland, Inc Property and equipment (net) Patents Goodwill Total assets 126,100 551,928 848,000 151,200 92,500 0 270,000 18,000 52,800 229,140 99,400 413,760 X 13,200 25,460 1,157,600 513,380 99,400 1,988,980 0 0 $ 521,000 $ 1,677,228 $ (74,040) X NCI share of CNI Plaza share of CNI Retained earnings, 1/1 442,300 (1,064,500) (482,600) 250,400 Net income Dividends declared $ (823,200) $ (1,064,500) (482,600) $ (442,300) (370,200) 21,000 24,200 3,200 X Retained earnings, 12/31 $ (791,500) $ 360,700 $ (1,547,100) 1,078,800 |(1,296,700) $ 718,100 1,405,500 200,400 860,100 0 463,600 X 300,400 653,200 229,600 214,900 45,200 X 1 152,400 16,800 29,400 633,775 2,100 120,700 Current assets Investment in Stanford Tradenames Property and equipment (net) Patents Goodwill Total assets Accounts payable Common stock Additional paid-in capital Noncontrolling interest Retained earnings, 12/31 2,100 $ $ $ 3,184,100 (118,600) (250,500) (1,518,300) 996,700 (68,000) (92,000) (45,200) 633,775 2,595,375 (186,600) (250,500) 1,518,300 92,000 45,200 |(1,296,700) (791,500) 1,296,700 X 2,377,900 Total liabilities and equities (3,184,100) $ (996,700) $ 492,000 1,754,075 "Red text indicates no response was expected in a cell or a formula-based calculation is incorrect; no points deducted