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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: $ 216,500 100,000 220,000 $ 536,500 Current assets $14,300 328,300 193,900 $ 536,500 Liabilities Common stock Retained earnings Property and equipment (net) Patents On January 1, 2020, Holland assessed the carrying amount of Zeeland's equipment (5-year remaining life) to be undervalued by $58,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $300,600. 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.

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: $ 216,500 100,000 220,000 $ 536,500 Current assets $14,300 328,300 193,900 $ 536,500 Liabilities Common stock Retained earnings Property and equipment (net) Patents On January 1, 2020, Holland assessed the carrying amount of Zeeland's equipment (5-year remaining life) to be undervalued by $58,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $300,600. 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.

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter13: Investments And Long-term Receivables
Section: Chapter Questions
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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: $ 216,500 100,000 $ 14,300 328,300 193,900 $ 536,500 Current assets Liabilities Property and equipment (net) Common stock Retained earnings 220,000 $ 536,500 Patents On January 1, 2020, Holland assessed the carrying amount of Zeeland's equipment (5-year remaining life) to be undervalued by $58,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $300,600. 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.
Transcribed Image Text: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: $ 216,500 100,000 $ 14,300 328,300 193,900 $ 536,500 Current assets Liabilities Property and equipment (net) Common stock Retained earnings 220,000 $ 536,500 Patents On January 1, 2020, Holland assessed the carrying amount of Zeeland's equipment (5-year remaining life) to be undervalued by $58,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $300,600. 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 $(675,600) 342,700 84,500 14,300 53,200 $ (431,500) 201,500 33,700 20,700 62,600 Sales Cost of goods sold Depreciation expense Amortization expense Other operating expenses Equity in Zeeland earnings (42,804) ( 223,704) Separate company net income 2$ $ (113,000) $ (304,600) (113,000) Retained earnings 1/1 (820,500) (223,704) 50,000 ( 994,204) Net income 30,000 $ (387,600) Dividends declared Retained earnings 12/31 125,300 590,568 840,000 149,600 Current assets $ 84,500 Investment in Zeeland Property and equipment (net) 262,000 150,500 $ 497,000 Patents Total assets $ 1,705,468 (391,264) $ (320,000) Liabilities (9,400) Common stock-Holland (100,000) (387,600) $(1,705,468) $ (497,000) Common stock-Zeeland Retained earnings 12/31 (994,204) Total liabilities and owners equity 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, 2021, Investment in Zeeland account balance. c. Prepare a worksheet to determine the amounts that should appear on Holland's December 31, 2021, consolidated financial statements.
Transcribed Image Text:The companies' financial statements for the year ending December 31, 2021, follow: Holland Zeeland $(675,600) 342,700 84,500 14,300 53,200 $ (431,500) 201,500 33,700 20,700 62,600 Sales Cost of goods sold Depreciation expense Amortization expense Other operating expenses Equity in Zeeland earnings (42,804) ( 223,704) Separate company net income 2$ $ (113,000) $ (304,600) (113,000) Retained earnings 1/1 (820,500) (223,704) 50,000 ( 994,204) Net income 30,000 $ (387,600) Dividends declared Retained earnings 12/31 125,300 590,568 840,000 149,600 Current assets $ 84,500 Investment in Zeeland Property and equipment (net) 262,000 150,500 $ 497,000 Patents Total assets $ 1,705,468 (391,264) $ (320,000) Liabilities (9,400) Common stock-Holland (100,000) (387,600) $(1,705,468) $ (497,000) Common stock-Zeeland Retained earnings 12/31 (994,204) Total liabilities and owners equity 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, 2021, Investment in Zeeland account balance. c. Prepare a worksheet to determine the amounts that should appear on Holland's December 31, 2021, consolidated financial statements.
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