Question

The Holtz Corporation acquired 80 percent of the 100,000 outstanding voting shares of Devine, Inc., for $6.35 per share on January 1, 2017. The remaining 20 percent of Devine’s shares also traded actively at $6.35 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 future life was undervalued by $78,500 and a fully amortized trademark with an estimated 10-year remaining life had a $59,000 fair value. At the acquisition date, Devine reported common stock of $100,000 and a retained earnings balance of $240,500.

Following are the separate financial statements for the year ending December 31, 2018:

	Holtz Corporation				Devine, Inc.
Sales	$	(721,000	)		$	(321,500	)
Cost of goods sold		227,000				108,000
Operating expenses		296,000				118,500
Dividend income		(16,000	)			0
Net income	$	(214,000	)		$	(95,000	)
Retained earnings, 1/1/18	$	(765,000	)		$	(310,500	)
Net income (above)		(214,000	)			(95,000	)
Dividends declared		80,000				20,000
Retained earnings, 12/31/18	$	(899,000	)		$	(385,500	)
Current assets	$	219,000			$	126,500
Investment in Devine, Inc		508,000				0
Buildings and equipment (net)		902,500				344,000
Trademarks		162,000				242,000
Total assets	$	1,791,500			$	712,500
Liabilities	$	(572,500	)		$	(227,000	)
Common stock		(320,000	)			(100,000	)
Retained earnings, 12/31/18 (above)		(899,000	)			(385,500	)
Total liabilities and equities	$	(1,791,500	)		$	(712,500	)

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

a.     Prepare a worksheet to consolidate these two companies as of December 31, 2018.

HOLTZ CORPORATION AND DEVINE, INC. Consolidation Worksheet For Year Ending December 31, 2018 Accounts Holtz Corporation Devine Inc. Consolidation Entries Noncontrolling Interest Consolidated Totals Debit Credit Sales $(721,000) $(321,500) Cost of goods sold 227,000 108,000 Operating expenses 296,000 118,500 Dividend income (16,000) 0 Separate company net income $(214,000) $(95,000) Consolidated net income NI attributable to noncontrolling interest NI attributable to Holtz Corp. Retained earnings, 1/1 $(765,000) $(310,500) Net income (214,000) (95,000) Dividends declared 80,000 20,000 Retained earnings, 12/31 $(899,000) $(385,500) Current assets $219,000 $126,500 Investment in Devine 508,000 0 Buildings and equipment (net) 902,500 344,000 Trademarks 162,000 242,000 Goodwill 0 0 Total assets $1,791,500 $712,500 Liabilities $(572,500) $(227,000) Common stock (320,000) (100,000) Retained earnings, 12/31 (899,000) (385,500) NCI in Devine, 1/1 NCI in Devine, 12/31 Total liabilities and equities $(1,791,500) $(712,500)

b.     Prepare a 2018 consolidated income statement for Holtz and Devine.

HOLTZ CORPORATION AND DEVINE, INC. Consolidated Income Statement For Year Ending December 31, 2018 ??? ??? ??? ??? ??? ??? Total expenses ??? To noncontrolling interest ??? To Holtz Corporation

c.      If instead the noncontrolling interest shares of Devine had traded for $4.78 surrounding Holtz’s acquisition date, what is the impact on goodwill?

Goodwill ??? to ???

Answer 1