The Holtz Corporation acquired 80 percent of the 100,000 outstanding voting shares of Devine, Inc., for $7.20 per share on January 1, 2017. The remaining 20 percent of Devine's shares also traded actively at $7.20 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 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, 2018:

At year-end, there were no intra-entity receivables or payables.
a. Prepare a worksheet to consolidate these two companies as of December 31, 2018.
b. Prepare a 2018 consolidated income statement for Holtz and Devine.
c. If instead the non-controlling interest shares of Devine had traded for $4.76 surrounding Holtz's acquisition date, what is the impact on goodwill?

Transcribed Image Text:

Holtz Corporation Devine, Inc. Sales Cost of goods sold Operating expenses Dividend income $ (641,000) $(399,000) 176,000 273,000 126,000 198,000 16,000) 186,000) (97 Net income Retained earnings, 1/1/18 Net income (above) Dividends declared $(762,000) $(296,500) (186,000) (97,000) 20,000 $ (878,000) $(373500) 70,000 Retained earnings, 12/31/18 Current assets Investment in Devine, Inc. Buildings and equipment (net) Trademarks.. $121,000 $120,500 576,000 887,000 335,000 236,000 1,733,000 691,500 149,000 Total assets Liabilities Common stock Retained earnings, 12/31/18 (above) $ (535,000) $(218,000) (320,000) (100,000) (878,000 373,500) S(1.733,000) (691.500 Total liabilities and equities