Current assets Property and equipment (net) $ 14,000 Liabilities Common stock 190,000 Retained earnings $ 212,000 160,000 Patents $472,000 $472,000 Holland Zeeland $ (640,500) $(428,500) 200,000 Sales Cost of goods sold Depreciation expense Amortization expense 325,000 80,000 34,000 14,000 21,000 Other operating expenses Equity in Zeeland earnings 52,000 63,500 (42,300) $ (211,800) $ (820,200) (211,800) 50,000 -0- Separate company net income. $(110,000) Retained earnings 1/1 Net income... Dividends declared.. Retained earnings 12/31. $(296,500) (110,000) 30,000 $ (982,000) $ 125,000 562,500 $(376,500) $ 81,500 -0- Current assets . Investment in Zeeland.. Property and equipment (net). Patents . 837,000 149,000 $ 1,673,500 $ (37 1,500) (320,000) -0- (982,000) $(1,673,500) 259,000 147,500 Total assets. $488,000 $ (11,500) -0- Liabilities.. Common stock - Holland. Common stock - Zeeland (100,000) (376,500) $(488,000) Retained earnings 12/31. Total liabilities and owners equity..
On January 1, 2017, Holland Corporation paid $8 per share to a group of Zeeland Corporation shareholders to acquire 60,000 shares of Zeeland’s 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. Zeeland’s acquisition date balance sheet follows:
On January 1, 2017, Holland assessed the carrying amount of Zeeland’s 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. Zeeland’s acquisition-date fair values for its current assets and liabilities were equal to their carrying amounts. Any remaining excess of Zeeland’s acquisition-date fair value over its book value was attributed to
The companies’ financial statements for the year ending December 31, 2018, follow:
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.
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