The Holtz Corporation acquired 80 percent of the 100,000 outstanding voting shares of Devine, Inc., for $7.15 per share on January 1, 2020. The remaining 20 percent of Devine's shares also traded actively at $7.15 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 $75,500 and a fully amortized trademark with an estimated 10-year remaining life had a $63,000 fair value. At the acquisition date, Devine reported common stock of $100,000 and a retained earnings balance of $309,500. Following are the separate financial statements for the year ending December 31, 2021: Sales Cost of goods sold Operating expenses Dividend income Net income Net income (above) Dividends declared Holtz Corporation $ (742,000) 208,000 342,000 (16,000) $ (208,000) (208,000) Retained earnings, 1/1/21 $ (764,000) Retained earnings, 12/31/21 60,000 Devine, Inc. $(275,750) 110,000 69,750 0 $ (96,000) $ (379,500) (96,000) 20,000 Current assets Investment in Devine, Inc. Buildings and equipment (net) Trademarks Total assets $ (912,000) $ (455,500) $ 202,500 $ 139,500 572,000 0 862,500 409,000 219,000 110,000 $ 1,747,000 Liabilities Common stock Retained earnings, 12/31/21 (above) Total liabilities and equities $ (515,000) $ 767,500 $ (212,000) (320,000) (912,000) (100,000) $ (1,747,000) (455,500) $(767,500) At year-end, there were no intra-entity receivables or payables. a. Prepare a worksheet to consolidate these two companies as of December 31, 2021. b. Prepare a 2021 consolidated income statement for Holtz and Devine. c. If instead the noncontrolling interest shares of Devine had traded for $5.48 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 $7.15 per share on January 1, 2020. The remaining 20 percent of Devine's shares also traded actively at $7.15 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 $75,500 and a fully amortized trademark with an estimated 10-year remaining life had a $63,000 fair value. At the acquisition date, Devine reported common stock of $100,000 and a retained earnings balance of $309,500. Following are the separate financial statements for the year ending December 31, 2021: Sales Cost of goods sold Operating expenses Dividend income Net income Net income (above) Dividends declared Holtz Corporation $ (742,000) 208,000 342,000 (16,000) $ (208,000) (208,000) Retained earnings, 1/1/21 $ (764,000) Retained earnings, 12/31/21 60,000 Devine, Inc. $(275,750) 110,000 69,750 0 $ (96,000) $ (379,500) (96,000) 20,000 Current assets Investment in Devine, Inc. Buildings and equipment (net) Trademarks Total assets $ (912,000) $ (455,500) $ 202,500 $ 139,500 572,000 0 862,500 409,000 219,000 110,000 $ 1,747,000 Liabilities Common stock Retained earnings, 12/31/21 (above) Total liabilities and equities $ (515,000) $ 767,500 $ (212,000) (320,000) (912,000) (100,000) $ (1,747,000) (455,500) $(767,500) At year-end, there were no intra-entity receivables or payables. a. Prepare a worksheet to consolidate these two companies as of December 31, 2021. b. Prepare a 2021 consolidated income statement for Holtz and Devine. c. If instead the noncontrolling interest shares of Devine had traded for $5.48 surrounding Holtz's acquisition date, what is the impact on goodwill?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The Holtz Corporation acquired 80 percent of the 100,000 outstanding voting shares of Devine, Inc., for $7.15 per share on January 1,
2020. The remaining 20 percent of Devine's shares also traded actively at $7.15 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 $75,500 and a fully amortized trademark with an estimated 10-year
remaining life had a $63,000 fair value. At the acquisition date, Devine reported common stock of $100,000 and a retained earnings
balance of $309,500.
Following are the separate financial statements for the year ending December 31, 2021:
Sales
Cost of goods sold
Operating expenses
Dividend income
Net income
Retained earnings, 1/1/21
Net income (above)
Dividends declared
Retained earnings, 12/31/21
Current assets
Investment in Devine, Inc.
Buildings and equipment (net)
Trademarks
Total assets
Liabilities
Common stock
Holtz
Corporation
$
(742,000)
208,000
342,000
Devine,
Inc.
$ (275,750)
110,000
69,750
0
(16,000)
$
好好
(208,000)
$ (96,000)
$
(764,000)
(208,000)
60,000
$$
(912,000)
$ (379,500)
(96,000)
20,000
$ (455,500)
$
202,500
$ 139,500
572,000
862,500
110,000
$ 1,747,000
$
(515,000)
(320,000)
(912,000)
0
409,000
219,000
$ 767,500
$ (212,000)
(100,000)
(455,500)
$ (767,500)
Retained earnings, 12/31/21 (above)
Total liabilities and equities
$ (1,747,000)
At year-end, there were no intra-entity receivables or payables.
a. Prepare a worksheet to consolidate these two companies as of December 31, 2021.
b. Prepare a 2021 consolidated income statement for Holtz and Devine.
c. If instead the noncontrolling interest shares of Devine had traded for $5.48 surrounding Holtz's acquisition date, what is the impact
on goodwill?
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