On January 1, 2023, Holland Corporation paid $8 per share to a group of Zeeland Corporation shareholders to acquire 60,000 sh 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 $ 14,000 Liabilities 268,000 Common stock 190,000 Retained earnings $ 212,000 100,000 160,000 $ 472,000 $ 472,000 On January 1, 2023, Holland assessed the carrying amount of Zeeland's equipment (5-year remaining life) to be undervalued by $55,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $285,000. Zeeland's acquisition-date fair values for its current assets and liabilities were equal to their carrying amounts. Any remaining excess of Zeelam 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 Holland $ (640,500) 325,000 80,000 14,000 Zeeland $ (428,500) Sales Cost of goods sold Depreciation expense Amortization expense Other operating expenses Equity in Zeeland earnings Separate company net income 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 52,000 (42,300) $ (211,800) $ (820,200) (211,800) 50,000 $ (982,000) $ 125,000 562,500 837,000 149,000 $ 1,673,500 $ (371,500) (320,000) (982,000) 200,000 34,000 21,000 63,500 0 $ (110,000) $ (296,500) (110,000) 30,000 $ (376,500) $ 81,500 0 259,000 147,500 $ 488,000 $ (11,500) 0 (100,000) (376,500) 0 $ (488.000) Total liabilities and owners' equity $ (1.673.500) 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 worksheets

On January 1, 2023, Holland Corporation paid $8 per share to a group of Zeeland Corporation shareholders to acquire 60,000 sh 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 $ 14,000 Liabilities 268,000 Common stock 190,000 Retained earnings $ 212,000 100,000 160,000 $ 472,000 $ 472,000 On January 1, 2023, Holland assessed the carrying amount of Zeeland's equipment (5-year remaining life) to be undervalued by $55,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $285,000. Zeeland's acquisition-date fair values for its current assets and liabilities were equal to their carrying amounts. Any remaining excess of Zeelam 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 Holland $ (640,500) 325,000 80,000 14,000 Zeeland $ (428,500) Sales Cost of goods sold Depreciation expense Amortization expense Other operating expenses Equity in Zeeland earnings Separate company net income 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 52,000 (42,300) $ (211,800) $ (820,200) (211,800) 50,000 $ (982,000) $ 125,000 562,500 837,000 149,000 $ 1,673,500 $ (371,500) (320,000) (982,000) 200,000 34,000 21,000 63,500 0 $ (110,000) $ (296,500) (110,000) 30,000 $ (376,500) $ 81,500 0 259,000 147,500 $ 488,000 $ (11,500) 0 (100,000) (376,500) 0 $ (488.000) Total liabilities and owners' equity $ (1.673.500) 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 worksheets

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

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 8MC

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