The Holtz Corporation acquired 80 percent of the 100,000 outstanding voting shares of Devine, Incorporated, for $6.70 per share on January 1, 2023. The remaining 20 percent of Devine's shares also traded actively at $6.70 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 $57,000 and a fully amortized trademark with an estimated 10-year remaining life had a $69,000 fair value. At the acquisition date, Devine reported common stock of $100,000 and a retained earnings balance of $224,000. Following are the separate financial statements for the year ending December 31, 2024: Sales Accounts Cost of goods sold Operating expenses Dividend income Net income Holtz Corporation $ (800,000) 285,000 299,000 (16,000) $ (232,000) Retained earnings, 1/1/24 $ (777,000) Net income (above) Dividends declared Retained earnings, 12/31/24 Current assets Investment in Devine, Incorporated Buildings and equipment (net) Trademarks Total assets Liabilities Common stock Retained earnings, 12/31/24 (above) Total liabilities and equities (232,000) 90,000 $ (919,000) $ 238,500 536,000 870,000 137,000 $ 1,781,500) $ (542,500) (320,000) (919,000) $ (1,781,500) At year-end, there were no Intra-entity receivables or payables. Required: Devine, Incorporated $ (379,500) 146,000 130,500 $ (103,000) $ (294,000) (103,000) 20,000 $ (377,000) $ 177,000 357,000 188,000 $ 722,000 $ (245,000) (100,000) (377,000) $ (722,000) a. Prepare a worksheet to consolidate these two companies as of December 31, 2024. b. Prepare a 2024 consolidated Income statement for Holtz and Devine. c. If Instead the noncontrolling Interest shares of Devine had traded for $4.50 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, Incorporated, for $6.70 per share on January 1, 2023. The remaining 20 percent of Devine's shares also traded actively at $6.70 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 $57,000 and a fully amortized trademark with an estimated 10-year remaining life had a $69,000 fair value. At the acquisition date, Devine reported common stock of $100,000 and a retained earnings balance of $224,000. Following are the separate financial statements for the year ending December 31, 2024: Sales Accounts Cost of goods sold Operating expenses Dividend income Net income Holtz Corporation $ (800,000) 285,000 299,000 (16,000) $ (232,000) Retained earnings, 1/1/24 $ (777,000) Net income (above) Dividends declared Retained earnings, 12/31/24 Current assets Investment in Devine, Incorporated Buildings and equipment (net) Trademarks Total assets Liabilities Common stock Retained earnings, 12/31/24 (above) Total liabilities and equities (232,000) 90,000 $ (919,000) $ 238,500 536,000 870,000 137,000 $ 1,781,500) $ (542,500) (320,000) (919,000) $ (1,781,500) At year-end, there were no Intra-entity receivables or payables. Required: Devine, Incorporated $ (379,500) 146,000 130,500 $ (103,000) $ (294,000) (103,000) 20,000 $ (377,000) $ 177,000 357,000 188,000 $ 722,000 $ (245,000) (100,000) (377,000) $ (722,000) a. Prepare a worksheet to consolidate these two companies as of December 31, 2024. b. Prepare a 2024 consolidated Income statement for Holtz and Devine. c. If Instead the noncontrolling Interest shares of Devine had traded for $4.50 surrounding Holtz's acquisition date, what is the impact on goodwill?
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
Chapter12: Intangibles
Section: Chapter Questions
Problem 18E
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Transcribed Image Text:The Holtz Corporation acquired 80 percent of the 100,000 outstanding voting shares of Devine, Incorporated, for $6.70 per share on
January 1, 2023. The remaining 20 percent of Devine's shares also traded actively at $6.70 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 $57,000 and a fully amortized trademark with
an estimated 10-year remaining life had a $69,000 fair value. At the acquisition date, Devine reported common stock of $100,000 and
a retained earnings balance of $224,000.
Following are the separate financial statements for the year ending December 31, 2024:
Sales
Accounts
Cost of goods sold
Operating expenses
Dividend income
Net income
Holtz Corporation
$ (800,000)
285,000
299,000
(16,000)
$ (232,000)
Retained earnings, 1/1/24
$ (777,000)
Net income (above)
Dividends declared
Retained earnings, 12/31/24
Current assets
Investment in Devine, Incorporated
Buildings and equipment (net)
Trademarks
Total assets
Liabilities
Common stock
Retained earnings, 12/31/24 (above)
Total liabilities and equities
(232,000)
90,000
$ (919,000)
$ 238,500
536,000
870,000
137,000
$ 1,781,500)
$ (542,500)
(320,000)
(919,000)
$ (1,781,500)
At year-end, there were no Intra-entity receivables or payables.
Required:
Devine,
Incorporated
$ (379,500)
146,000
130,500
$ (103,000)
$ (294,000)
(103,000)
20,000
$ (377,000)
$ 177,000
357,000
188,000
$ 722,000
$ (245,000)
(100,000)
(377,000)
$ (722,000)
a. Prepare a worksheet to consolidate these two companies as of December 31, 2024.
b. Prepare a 2024 consolidated Income statement for Holtz and Devine.
c. If Instead the noncontrolling Interest shares of Devine had traded for $4.50 surrounding Holtz's acquisition date, what is the impact
on goodwill?
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