Question

On January 1, 2020, Holland Corporation paid $9 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 $8.00 per share both before and after the acquisition by Holland. Zeeland’s acquisition date balance sheet follows: Current assets $ 14,200 Liabilities $ 215,000 Property and equipment (net) 328,200 Common stock 100,000 Patents 192,600 Retained earnings 220,000 $ 535,000 $ 535,000 On January 1, 2020, Holland assessed the carrying amount of Zeeland’s equipment (5-year remaining life) to be undervalued by $57,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $295,400. 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 goodwill. The companies’ financial statements for the year ending December 31, 2021, follow: Holland Zeeland Sales $ (663,900 ) $ (430,500 ) Cost of goods sold 336,800 201,000 Depreciation expense 83,000 33,800 Amortization expense 14,200 20,800 Other operating expenses 52,800 62,900 Equity in Zeeland earnings (42,636 ) 0 Separate company net income $ (219,736 ) $ (112,000 ) Retained earnings 1/1 $ (820,400 ) $ (301,900 ) Net income (219,736 ) (112,000 ) Dividends declared 50,000 30,000 Retained earnings 12/31 $ (990,136 ) $ (383,900 ) Current assets $ 125,200 $ 83,500 Investment in Zeeland 589,212 0 Property and equipment (net) 839,000 261,000 Patents 149,400 149,500 Total assets $ 1,702,812 $ 494,000 Liabilities $ (392,676 ) $ (10,100 ) Common stock—Holland (320,000 ) 0 Common stock—Zeeland 0 (100,000 ) Retained earnings 12/31 (990,136 ) (383,900 ) Total liabilities and owners equity $ (1,702,812 ) $ (494,000 ) At year-end, there were no intra-entity receivables or payables. Compute the amount of goodwill recognized in Holland’s acquisition of Zeeland and the allocation of goodwill to the controlling and noncontrolling interest. Show how Holland determined its December 31, 2021, Investment in Zeeland account balance. Prepare a worksheet to determine the amounts that should appear on Holland’s December 31, 2021, consolidated financial statements.

Answer 1

a)	Particular	Amount($)	Amount($)
	Considering transferred by holland corporation ( $ 9 * 60000 shares)		540000
	Fair value of the non controlling Interest ( $ 8 * 40000 shares)		320000
	Total zeeland fair value at jan 1 2020		860000
	Zeeland book value at jan 1 2020		-320000
	Excess Acqusition date fair over book value		540000
	To equipment ( 5 year remaining life )	57000
	To Patent ( 10 year remaining life )	295400	-352400
	Goodwill		187600
	Goodwill allocation	Holland	NCI
	Acquisition date fair value (a)	540000	320000
	Identifiable net assets ( share 60% and 40%) (b)	-403440	-268960
		( 672400 * 60%)	( 672400 * 40%)
	Goodwill allocation ( a - b)	136560	51040
	Identifiable net assets calculation ( zeeland)
	Current assets	14200
	Property and equipment ( 57000+ 328200)	385200
	Patents ( 295400 + 192600)	488000
	liabilities	-215000
	Total fair value	672400

(b)

Investment In Zealand
Particular	Amount($)
Initial Value	540000
Change in zee land's RE *60%
( 383900 - 220000 ) * 60%	98340
Excess amortization ( 40940 * 60% * 2)	-49128
Investment in zeeland 12/31/2021	589212
Calculation of excess amortization :
Equipment	57000 / 5	11400
Patent	295400 / 10	29540
Excess amortization		40940

( Please post other part of the question separately )