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The Holtz Corporation acquired 80 percent of the 100,000 outstanding voting shares of Devine, Inc., for...

The Holtz Corporation acquired 80 percent of the 100,000 outstanding voting shares of Devine, Inc., for $7.15 per share on January 1, 2017. The remaining 20 percent of Devine’s shares also traded actively at $7.15 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 $75,500 and a fully amortized trademark with an estimated 10-year remaining life had a $63,000 fair value. At the acquisition date, Devine reported common stock of $100,000 and a retained earnings balance of $309,500.

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

Holtz
Corporation
Devine,
Inc.
Sales $ (742,000 ) $ (275,750 )
Cost of goods sold 208,000 110,000
Operating expenses 342,000 69,750
Dividend income (16,000 ) 0
Net income $ (208,000 ) $ (96,000 )
Retained earnings, 1/1/18 $ (764,000 ) $ (379,500 )
Net income (above) (208,000 ) (96,000 )
Dividends declared 60,000 20,000
Retained earnings, 12/31/18 $ (912,000 ) $ (455,500 )
Current assets $ 202,500 $ 139,500
Investment in Devine, Inc 572,000 0
Buildings and equipment (net) 862,500 409,000
Trademarks 110,000 219,000
Total assets $ 1,747,000 $ 767,500
Liabilities $ (515,000 ) $ (212,000 )
Common stock (320,000 ) (100,000 )
Retained earnings, 12/31/18 (above) (912,000 ) (455,500 )
Total liabilities and equities $ (1,747,000 ) $ (767,500 )

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.

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

c.If instead the noncontrolling interest shares of Devine had traded for $5.48 surrounding Holtz’s acquisition date, what is the impact on goodwill?

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