Problem 4-39 (Static) (LO 4-5, 4-6, 4-7)

The Holtz Corporation acquired 80 percent of the 100,000 outstanding voting shares of Devine, Inc., for $7.20 per share on January 1, 2020. The remaining 20 percent of Devines shares also traded actively at $7.20 per share before and after Holtzs acquisition. An appraisal made on that date determined that all book values appropriately reflected the fair values of Devines underlying accounts except that a building with a five-year future life was undervalued by $85,500 and a fully amortized trademark with an estimated 10-year remaining life had a $64,000 fair value. At the acquisition date, Devine reported common stock of $100,000 and a retained earnings balance of $226,500.

Following are the separate financial statements for the year ending December 31, 2021:

	Holtz Corporation				Devine, Inc.
Sales	$	(641,000	)		$	(399,000	)
Cost of goods sold		198,000				176,000
Operating expenses		273,000				126,000
Dividend income		(16,000	)			0
Net income	$	(186,000	)		$	(97,000	)
Retained earnings, 1/1/21	$	(762,000	)		$	(296,500	)
Net income (above)		(186,000	)			(97,000	)
Dividends declared		70,000				20,000
Retained earnings, 12/31/21	$	(878,000	)		$	(373,500	)
Current assets	$	121,000			$	120,500
Investment in Devine, Inc.		576,000				0
Buildings and equipment (net)		887,000				335,000
Trademarks		149,000				236,000
Total assets	$	1,733,000			$	691,500
Liabilities	$	(535,000	)		$	(218,000	)
Common stock		(320,000	)			(100,000	)
Retained earnings, 12/31/21 (above)		(878,000	)			(373,500	)
Total liabilities and equities	$	(1,733,000	)		$	(691,500	)

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

1. Prepare a worksheet to consolidate these two companies as of December 31, 2021.

2. Prepare a 2021 consolidated income statement for Holtz and Devine.

3. If instead the noncontrolling interest shares of Devine had traded for $4.76 surrounding Holtzs acquisition date, what is the impact on goodwill?

Accounts Noncontrolling Consolidated Interest Totals HOLTZ CORPORATION AND DEVINE, INC. Consolidation Worksheet For Year Ending December 31, 2021 Holtz Consolidation Entries Devine Inc. Corporation Debit Credit $ (641,000) $ (399,000) 198,000 176,000 273,000 126,000 (16,000) 0 $ (186,000) $ (97,000) Sales Cost of goods sold Operating expenses Dividend income Separate company net income Consolidated net income Ni attributable to noncontrolling interest NI attributable to Holtz Corp. $ Retained earnings, 1/1/21 Net income Dividends declared Retained earnings, 12/31/21 (762,000) $ (296,500) (186,000) (97,000) 70,000 20,000 (878,000) $ (373,500) $ $ 120,500 0 Current assets Investment in Devine, Inc. Buildings and equipment (net) Trademarks Goodwill Total assets 121,000 $ 576,000 887,000 149,000 335,000 236,000 0 0 $ 1,733,000 $ 691,500 Liabilities $ (535,000) $ (218,000) (320,000) (100,000) (878,000) (373,500) Common stock Retained earnings, 12/31/21 (above) NCI in Devine, 1/1 NCI in Devine, 12/31 Total liabilities and equities 0 $ (1,733,000) (691,500) $ 0 $ 0 Complete this question by entering your answers in the tabs below. Required A Required B Required C Prepare a 2021 consolidated income statement for Holtz and Devine. (Enter all amounts as positive values.) HOLTZ CORPORATION AND DEVINE, INC. Consolidated Income Statement For Year Ending December 31, 2021 Total expenses 0 $ 0 To noncontrolling interest To Holtz Corporation Required A Required B Required C If instead the noncontrolling interest shares of Devine had traded for $4.76 surrounding Holtz's acquisition date, what is the impact on goodwill? Goodwill to