Prepare a worksheet to consolidate these two companies as of December 31, 2021. Prepare a 2021 consolidated income statement for Holtz and Devine. If instead the noncontrolling interest shares of Devine had traded for $5.04 surrounding Holtz’s acquisition date, what is the impact on goodwill?
The Holtz Corporation acquired 80 percent of the 100,000 outstanding voting shares of Devine, Inc., for $7.35 per share on January 1, 2020. The remaining 20 percent of Devine’s shares also traded actively at $7.35 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 $70,000 and a fully amortized trademark with an estimated 10-year remaining life had a $70,000 fair value. At the acquisition date, Devine reported common stock of $100,000 and a
Following are the separate financial statements for the year ending December 31, 2021:
| Holtz Corporation |
Devine, Inc. |
||||||
| Sales | $ | (741,000 | ) | $ | (371,000 | ) | |
| Cost of goods sold | 218,000 | 173,000 | |||||
| Operating expenses | 292,000 | 96,000 | |||||
| Dividend income | (16,000 | ) | 0 | ||||
| Net income | $ | (247,000 | ) | $ | (102,000 | ) | |
| Retained earnings, 1/1/21 | $ | (792,000 | ) | $ | (334,000 | ) | |
| Net income (above) | (247,000 | ) | (102,000 | ) | |||
| Dividends declared | 50,000 | 20,000 | |||||
| Retained earnings, 12/31/21 | $ | (989,000 | ) | $ | (416,000 | ) | |
| Current assets | $ | 468,000 | $ | 176,000 | |||
| Investment in Devine, Inc. | 588,000 | 0 | |||||
| Buildings and equipment (net) | 842,500 | 379,000 | |||||
| Trademarks | 123,000 | 233,000 | |||||
| Total assets | $ | 2,021,500 | $ | 788,000 | |||
| Liabilities | $ | (712,500 | ) | $ | (272,000 | ) | |
| Common stock | (320,000 | ) | (100,000 | ) | |||
| Retained earnings, 12/31/21 (above) | (989,000 | ) | (416,000 | ) | |||
| Total liabilities and equities | $ | (2,021,500 | ) | $ | (788,000 | ) | |
At year-end, there were no intra-entity receivables or payables.
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Prepare a worksheet to consolidate these two companies as of December 31, 2021.
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Prepare a 2021 consolidated income statement for Holtz and Devine.
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If instead the noncontrolling interest shares of Devine had traded for $5.04 surrounding Holtz’s acquisition date, what is the impact on
goodwill ?
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