Required: a1. Compute the amount of goodwill recognized in Holland's acquisition of Zeeland. a2. Show the allocation of goodwill to the controlling and noncontrolling interest. b. Show how Holland determined its December 31, 2024, Investment in Zeeland account balance. c. Prepare a worksheet to determine the amounts that should appear on Holland's December 31, 2024, consolidated financial statomonte

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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On January 1, 2023, Holland Corporation paid $8 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 $6.50 per share both before and after the acquisition by Holland.
Zeeland's acquisition date balance sheet follows:
Current assets
Property and equipment (net)
Patents
$ 14,800 Liabilities
268,800 Common stock
200,400 Retained earnings
$ 224,000
100,000
160,000
$ 484,000
$ 484,000
On January 1, 2023, Holland assessed the carrying amount of Zeeland's equipment (5-year remaining life) to be undervalued by
$63,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $315,600. 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, 2024, follow:
Account
Zeeland
Cost of goods sold
es
Sales
Holland
$ (734,100)
372,200
$ (436,500)
204,000
Depreciation expense
92,000
33,200
14,800
20,200
55,200
(44,304)
61,100
Separate company net income
$ (244,204)
$ (118,000)
$ (821,000)
Amortization expense
Other operating expenses
Equity in Zeeland earnings
Retained earnings, 1/1
Net income
Dividends declared
Retained earnings, 12/31
Current assets
Investment in Zeeland
Property and equipment (net)
Patents
Total assets
Liabilities
Common stock-Holland
Common stock-Zeeland
Retained earnings, 12/31
Total liabilities and owners' equity
(244,204)
50,000
$ (1,015,204)
$ 125,800
574,668
845,000
150,600
$ 1,696,068
$ (360,864)
(320,000)
$ (318,100)
(118,000)
30,000
$ (406,100)
$ 89,500
0
267,000
155,500
$ 512,000
$ (5,900)
0
(100,000)
(406,100)
$ (512,000)
(1,015,204)
$ (1,696,068)
At year-end, there were no intra-entity receivables or payables.
Required:
a1. Compute the amount of goodwill recognized in Holland's acquisition of Zeeland.
a2. Show the allocation of goodwill to the controlling and noncontrolling interest.
b. Show how Holland determined its December 31, 2024, Investment in Zeeland account balance.
c. Prepare a worksheet to determine the amounts that should appear on Holland's December 31, 2024, consolidated financial
statamonte
Transcribed Image Text:On January 1, 2023, Holland Corporation paid $8 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 $6.50 per share both before and after the acquisition by Holland. Zeeland's acquisition date balance sheet follows: Current assets Property and equipment (net) Patents $ 14,800 Liabilities 268,800 Common stock 200,400 Retained earnings $ 224,000 100,000 160,000 $ 484,000 $ 484,000 On January 1, 2023, Holland assessed the carrying amount of Zeeland's equipment (5-year remaining life) to be undervalued by $63,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $315,600. 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, 2024, follow: Account Zeeland Cost of goods sold es Sales Holland $ (734,100) 372,200 $ (436,500) 204,000 Depreciation expense 92,000 33,200 14,800 20,200 55,200 (44,304) 61,100 Separate company net income $ (244,204) $ (118,000) $ (821,000) Amortization expense Other operating expenses Equity in Zeeland earnings Retained earnings, 1/1 Net income Dividends declared Retained earnings, 12/31 Current assets Investment in Zeeland Property and equipment (net) Patents Total assets Liabilities Common stock-Holland Common stock-Zeeland Retained earnings, 12/31 Total liabilities and owners' equity (244,204) 50,000 $ (1,015,204) $ 125,800 574,668 845,000 150,600 $ 1,696,068 $ (360,864) (320,000) $ (318,100) (118,000) 30,000 $ (406,100) $ 89,500 0 267,000 155,500 $ 512,000 $ (5,900) 0 (100,000) (406,100) $ (512,000) (1,015,204) $ (1,696,068) At year-end, there were no intra-entity receivables or payables. Required: a1. Compute the amount of goodwill recognized in Holland's acquisition of Zeeland. a2. Show the allocation of goodwill to the controlling and noncontrolling interest. b. Show how Holland determined its December 31, 2024, Investment in Zeeland account balance. c. Prepare a worksheet to determine the amounts that should appear on Holland's December 31, 2024, consolidated financial statamonte
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