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 $ 14,300 Liabilities $ 216,500 Property and equipment (net) 328,300 Common stock 100,000 Patents 193,900 Retained earnings 220,000 $ 536,500 $ 536,500 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 Sales $ (675,600 ) $ (431,500 ) Cost of goods sold 342,700 201,500 Depreciation expense 84,500 33,700 Amortization expense 14,300 20,700 Other operating expenses 53,200 62,600 Equity in Zeeland earnings (42,804 ) 0 Separate company net income $ (223,704 ) $ (113,000 ) Retained earnings 1/1 $ (820,500 ) $ (304,600 ) Net income (223,704 ) (113,000 ) Dividends declared 50,000 30,000 Retained earnings 12/31 $ (994,204 ) $ (387,600 ) Current assets $ 125,300 $ 84,500 Investment in Zeeland 590,568 0 Property and equipment (net) 840,000 262,000 Patents 149,600 150,500 Total assets $ 1,705,468 $ 497,000 Liabilities $ (391,264 ) $ (9,400 ) Common stock—Holland (320,000 ) 0 Common stock—Zeeland 0 (100,000 ) Retained earnings 12/31 (994,204 ) (387,600 ) Total liabilities and owners equity $ (1,705,468 ) $ (497,000 ) 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.

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 $ 14,300 Liabilities $ 216,500 Property and equipment (net) 328,300 Common stock 100,000 Patents 193,900 Retained earnings 220,000 $ 536,500 $ 536,500 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 Sales $ (675,600 ) $ (431,500 ) Cost of goods sold 342,700 201,500 Depreciation expense 84,500 33,700 Amortization expense 14,300 20,700 Other operating expenses 53,200 62,600 Equity in Zeeland earnings (42,804 ) 0 Separate company net income $ (223,704 ) $ (113,000 ) Retained earnings 1/1 $ (820,500 ) $ (304,600 ) Net income (223,704 ) (113,000 ) Dividends declared 50,000 30,000 Retained earnings 12/31 $ (994,204 ) $ (387,600 ) Current assets $ 125,300 $ 84,500 Investment in Zeeland 590,568 0 Property and equipment (net) 840,000 262,000 Patents 149,600 150,500 Total assets $ 1,705,468 $ 497,000 Liabilities $ (391,264 ) $ (9,400 ) Common stock—Holland (320,000 ) 0 Common stock—Zeeland 0 (100,000 ) Retained earnings 12/31 (994,204 ) (387,600 ) Total liabilities and owners equity $ (1,705,468 ) $ (497,000 ) 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.

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter9: Metric-analysis Of Financial Statements

Section: Chapter Questions

Problem 9.23E: Unusual income statement items Assume that the amount of each of the following items is material to...

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Current assets	$	14,300	Liabilities	$	216,500
Property and equipment (net)		328,300	Common stock		100,000
Patents		193,900	Retained earnings		220,000
	$	536,500		$	536,500

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
Sales	$	(675,600	)	$	(431,500	)
Cost of goods sold		342,700			201,500
Depreciation expense		84,500			33,700
Amortization expense		14,300			20,700
Other operating expenses		53,200			62,600
Equity in Zeeland earnings		(42,804	)		0
Separate company net income	$	(223,704	)	$	(113,000	)

Retained earnings 1/1	$	(820,500	)	$	(304,600	)
Net income		(223,704	)		(113,000	)
Dividends declared		50,000			30,000
Retained earnings 12/31	$	(994,204	)	$	(387,600	)

Current assets	$	125,300		$	84,500
Investment in Zeeland		590,568			0
Property and equipment (net)		840,000			262,000
Patents		149,600			150,500
Total assets	$	1,705,468		$	497,000

Liabilities	$	(391,264	)	$	(9,400	)
Common stock—Holland		(320,000	)		0
Common stock—Zeeland		0			(100,000	)
Retained earnings 12/31		(994,204	)		(387,600	)
Total liabilities and owners equity	$	(1,705,468	)	$	(497,000	)

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.

Consolidated net income
Noncontrolling interest in CNI
Controlling interest net income
Retained earnings 1/1
$ (820,500) $ (304,600)
(113,000)
Net income
(223,704)
Dividends declared
50,000
30,000
Retained earnings 12/31
$ (994,204) S (387,600)
Current assets
125,300 $
84,500
Investment in Zeeland, Inc
590,568
Property and equipment (net)
840,000
262,000
Patents
149,600
150,500
Goodwill
Total assets
$ 1,705,468S
497,000
Liabilities
(391.264)
(9,400)
Common stock
(320,000)
(100,000)
Noncontrolling interest
(994,204)
$ (1,705,468) S (497,000) $
Retained earnings 12/31
(387,600)
Total liabilities and equities

HOLLAND CORPORATION AND ZEELAND CORPORATON
Consolidation Worksheet
For Year Ending December 31, 2021
Consolidation Entries
Noncontrolling
Consolidated
Accounts
Holland
Zeeland
Debit
Credit
Interest
Totals
$ (675,600) $ (431,500)
201,500
33,700
20,700
Sales
Cost of goods sold
Depreciation expense
Amortization expense
Other operating expenses
Equity in Zeeland eamings
342,700
84,500
14,300
53,200
62,600
(42,804)
Separate company net income
$ (223,704) $ (113,000)
Consolidated net income
Noncontrolling interest in CNI
Controlling interest net income
Retained earnings 1/1
$ (820,500) s (304,600)

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