Question

On January 1, 2017, 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 $ 15,700 Liabilities $ 237,500 Property and equipment (net) 329,700 Common stock 100,000 Patents 212,100 Retained earnings 220,000 $ 557,500 $ 557,500 On January 1, 2017, Holland assessed the carrying amount of Zeeland’s equipment (5-year remaining life) to be undervalued by $50,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $420,100. 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, 2018, follow: Holland Zeeland Sales $ (582,600 ) $ (445,500 ) Cost of goods sold 295,400 208,500 Depreciation expense 73,000 32,300 Amortization expense 15,700 19,300 Other operating expenses 58,800 58,400 Equity in Zeeland earnings (44,994 ) 0 Separate company net income $ (184,694 ) $ (127,000 ) Retained earnings 1/1 $ (821,900 ) $ (342,400 ) Net income (184,694 ) (127,000 ) Dividends declared 50,000 30,000 Retained earnings 12/31 $ (956,594 ) $ (439,400 ) Current assets $ 126,700 $ 98,500 Investment in Zeeland 609,228 0 Property and equipment (net) 854,000 276,000 Patents 152,400 168,500 Total assets $ 1,742,328 $ 543,000 Liabilities $ (465,734 ) $ (3,600 ) Common stock - Holland (320,000 ) 0 Common stock - Zeeland 0 (100,000 ) Retained earnings 12/31 (956,594 ) (439,400 ) Total liabilities and owners equity $ (1,742,328 ) $ (543,000 ) 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.

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.

	Amount a1. Goodwill Controlling Interest NCI a2. Goodwill allocation Amount b. Investment in Zeeland 12/31/18

HOLLAND CORPORATION AND ZEELAND CORPORATION
Consolidation Worksheet
For Year Ending December 31, 2018
			Consolidation Entries			Noncontrolling	Consolidated
Accounts	Holland	Zeeland	Debit	Credit	Interest	Totals
Sales	$(582,600)	$(445,500)
Cost of goods sold	295,400	208,500
Depreciation expense	73,000	32,300
Amortization expense	15,700	19,300
Other operating expenses	58,800	58,400
Equity in Zeeland earnings	(44,994)	0
Separate company net income	$(184,694)	$(127,000)
Consolidated net income
Noncontrolling interest in CNI
Controlling interest net income
Retained earnings, 1/1/18	$(821,900)	$(342,400)
Net income	(184,694)	(127,000)
Dividends declared	50,000	30,000
Retained earnings, 12/31	$(956,594)	$(439,400)
Current assets	$126,700	$98,500
Investment in Zeeland, Inc	609,228	0
Property and equipment (net)	854,000	276,000
Patents	152,400	168,500
Goodwill	0	0
Total assets	$1,742,328	$543,000
Liabilities	(465,734)	(3,600)
Common stock	(320,000)	(100,000)
Noncontrolling interest
Retained earnings, 12/31	(956,594)	(439,400)
Total liabilities and equities	$(1,742,328)	$(543,000)

Answer 1