Problem 4-36 (LO 4-5, 4-6, 4-7)

The Holtz Corporation acquired 80 percent of the 100,000 outstanding voting shares of Devine, Inc., for $6.50 per share on January 1, 2014. The remaining 20 percent of Devine's shares also traded actively at $6.50 per share before and after Holtz's acquisition. An appraisal made on that date determined that all book values appropriately reflected the fair values of Devine's underlying accounts except that a building with a 5-year life was undervalued by $59,500 and a fully amortized trademark with an estimated 10-year remaining life had a $66,000 fair value. At the acquisition date, Devine reported common stock of $100,000 and a retained earnings balance of $189,500.

Following are the separate financial statements for the year ending December 31, 2015:

		Holtz Corporation		Devine, Inc.
Sales		$	(704,000	)		$	(439,000	)
Cost of goods sold			260,000				171,000
Operating expenses			249,000				120,000
Dividend income			(16,000	)			0
Net income		$	(211,000	)		$	(148,000	)
Retained earnings, 1/1/15		$	(735,000	)		$	(259,500	)
Net income (above)			(211,000	)			(148,000	)
Dividends declared			70,000				20,000
Retained earnings, 12/31/15		$	(876,000	)		$	(387,500	)
Current assets		$	198,500			$	196,500
Investment in Devine, Inc			520,000				0
Buildings and equipment (net)			837,500				332,000
Trademarks			150,000				159,000
Total assets		$	1,706,000			$	687,500
Liabilities		$	(510,000	)		$	(200,000	)
Common stock			(320,000	)			(100,000	)
Retained earnings, 12/31/15 (above)			(876,000	)			(387,500	)
Total liabilities and equities		$	(1,706,000	)		$	(687,500	)

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

a.	Prepare a worksheet to consolidate these two companies as of December 31, 2015.(For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet.)

b.	Prepare a 2015 consolidated income statement for Holtz and Devine.(Enter all amounts as positive values.)

c.	If instead the noncontrolling interest shares of Devine had traded for $4.15 surrounding Holtz's acquisition date, what is the impact on goodwill?

Please fill in the yellow cells in excel sheet.

A. HOLTZ CORPORATION AND DEVINE, INC. Consolidation Worksheet For Year Ending December 31, 2015 Consolidation Entries Accounts Sales Holtz Corporation Devine Inc. -704,000 -439,000 Cost of goods sold 260,000 171,000 Operating expenses 249,000 120,000 Dividend income -16,000 Separate company net income -211,000 -148,000 Retained earnings, 1/1 -735,000 -259,500 Net income -211,000 -148,000 70,000 20,000 -876,000 -387,500 Current assets 198,500 196,500 Investment in Devine 520,000 Buildings and equipment (net) 837,500 332,000 Trademarks 150,000 159,000 0 0 1,706,000 687,500 Liabilities -510,000 -200,000 Common stock -320,000 -100,000 Retained earnings, 12/31 -876,000 -387,500 Consolidated net income NCI in consolidated net income Holtz's interest in consolidated net income Dividends declared Retained earnings, 12/31 Goodwill Total assets NCI in Devine, 1/1 Debit NCI in Devine, 12/31 Total liabilities and equities B. -1,706,000 -687,500 0 HOLTZ CORPORATION AND DEVINE, INC. Consolidated Income Statement For Year Ending December 31, 2015 Sales Cost of goods sold Operating expenses Total expenses 0 Consolidated net income 0 Noncontrolling interest in CNI Controlling interest in CNI C. Goodwill 0 decrease to EVINE, INC. eet 31, 2015 Consolidation Entries Noncontro Consolidat lling ed Totals Interest Credit 0 0 0 0 0 0 0