On January 1, 2023, Holland Corporation paid $8 per share to a group of Zeeland Corporation shareholders to acquire 60,000 sharesof Zeeland's outstanding voting stock, representing a 60 percent ownership interest. The remaining 40,000 shares of Zeelandcontinued to trade in the market close to its recent average of $6.50 per share both before and after the acquisition by Holland.Zeeland's acquisition date balance sheet follows:Current assetsProperty and equipment (net)Patents$ 14,800 Liabilities268,800 Common stock200,400 Retained earnings$ 224,000100,000160,000$ 484,000$ 484,000On 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 $315,600. Zeeland'sacquisition-date fair values for its current assets and liabilities were equal to their carrying amounts. Any remaining excess of Zeeland'sacquisition-date fair value over its book value was attributed to goodwill.The companies' financial statements for the year ending December 31, 2024, follow:AccountZeelandCost of goods soldesSalesHolland$ (734,100)372,200$ (436,500)204,000Depreciation expense92,00033,20014,80020,20055,200(44,304)61,100Separate company net income$ (244,204)$ (118,000)$ (821,000)Amortization expenseOther operating expensesEquity in Zeeland earningsRetained earnings, 1/1Net incomeDividends declaredRetained earnings, 12/31Current assetsInvestment in ZeelandProperty and equipment (net)PatentsTotal assetsLiabilitiesCommon stock-HollandCommon stock-ZeelandRetained earnings, 12/31Total liabilities and owners' equity(244,204)50,000$ (1,015,204)$ 125,800574,668845,000150,600$ 1,696,068$ (360,864)(320,000)$ (318,100)(118,000)30,000$ (406,100)$ 89,5000267,000155,500$ 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 financialstatamonte

a) Computation of goodwill and its allocation:DetailsAmountConsideration transferred by Holland ($8…

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

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

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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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 $ 14,000 Liabilities 268,000 Common stock. 190,000 Retained earnings $ 212,000 100,000 160,000 $ 472,000 $ 472,000 es On January 1, 2023, Holland assessed the carrying amount of Zeetand'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 Zeeland's…
On January 1, 2023, Holland Corporation paid $7 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 $5.00 per share both before and after the acquisition by Holland. Zeeland's acquisition date balance sheet follows: Current assets Property and equipment (net) Patents On January 1, 2023, Holland assessed the carrying amount of Zeeland's equipment (5-year remaining life) to be undervalued by $43,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $246,400. 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…
On January 1, 2023, Holland Corporation paid $7 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 $5.50 per share both before and after the acquisition by Holland. Zeeland's acquisition date balance sheet follows: Current assets $ 16,100 Liabilities Property and equipment (net) 230,100 Connon stock Patents 217,300 Retained earnings $ 463,500 On January 1, 2023, Holland assessed the carrying amount of Zeeland's equipment (5-year remaining life) to be undervalued by $46,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $275,200. 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…
On January 1, 2023, Holland Corporation paid $7 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 $5.00 per share both before and after the acquisition by Holland. Zeeland's acquisition date balance sheet follows: Current assets Property and equipment (net) Patents $14,700 Liabilities 288,708 Common stock 199,100 Retained earnings $422,500 $222,500 100,000 100,000 $ 422,500 On January 1, 2023, Holland assessed the carrying amount of Zeeland's equipment (5-year remaining life) to be undervalued by $62,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $226,900. Zeeland's acquisition-date fair values for its current assets and liabilities were equal to their carrying amounts. Any remaining excess of Zeeland's…
On January 1, 2023, Holland Corporation paid $7 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 $5.00 per share both before and after the acquisition by Holland. Zeeland's acquisition date balance sheet follows: Current assets $ $ 16,200 Liabilities Property and equipment (net) Patents 245,000 210,200 Common stock 100,000 218,600 Retained earnings 100,000 $ 445,000 $ 445,000 S On January 1, 2023, Holland assessed the carrying amount of Zeeland's equipment (5-year remaining life) to be undervalued by $45,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $244,800. Zeeland's acquisition-date fair values for its current assets and liabilities were equal to their carrying amounts. Any remaining excess of Zeeland's…
On January 1, 2020, Holland Corporation paid $7 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 $5.50 per share both before and after the acquisition by Holland. Zeeland’s acquisition date balance sheet follows: Current assets $ 15,100 Liabilities $ 228,500 Property and equipment (net) 229,100 Common stock 100,000 Patents 204,300 Retained earnings 120,000 $ 448,500 $ 448,500 On January 1, 2020, Holland assessed the carrying amount of Zeeland’s equipment (5-year remaining life) to be undervalued by $66,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $254,600. Zeeland’s acquisition-date fair values for its current assets and liabilities were equal to…
On January 1, 2020, 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 $ 14,000 Liabilities $ 212,000 Property and equipment (net) 268,000 Common stock 100,000 Patents 190,000 Retained earnings 160,000 $ 472,000 $ 472,000 On January 1, 2020, 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…
On January 1, 2020, Holland Corporation paid $9 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 $8.00 per share both before and after the acquisition by Holland. Zeeland’s acquisition date balance sheet follows: Current assets $ 14,300 Liabilities $ 216,500 Property and equipment (net) 328,300 Common stock 100,000 Patents 193,900 Retained earnings 220,000 $ 536,500 $ 536,500 On January 1, 2020, Holland assessed the carrying amount of Zeeland’s equipment (5-year remaining life) to be undervalued by $58,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $300,600. Zeeland’s acquisition-date fair values for its current assets and liabilities were equal to…
Nascent, Inc., acquires 60 percent of Sea-Breeze Corporation for $414,000 cash on January 1, 2015. The remaining 40 percent of the Sea-Breeze shares traded near a total value of $276,000 both before and after the acquisition date. On January 1, 2015, Sea-Breeze had the following assets and liabilities:The companies’ financial statements for the year ending December 31, 2018, follow:Answer the following questions:a. How can the accountant determine that the parent has applied the initial value method?b. What is the annual excess amortization initially recognized in connection with this acquisition?c. If the parent had applied the equity method, what investment income would the parent have recorded in 2018?d. What amount should the parent report as retained earnings in its January 1, 2018, consolidated balance sheet?e. What is consolidated net income for 2018 and what amounts are attributable to the controlling and noncontrolling interests?f. Within consolidated statements at January 1,…
On January 1, 2023, Tamarisk Company issued 1,450 of its $20 par value common shares with a fair value of $60 per share in exchange for the 2,000 outstanding common shares of Sheffield Company in a purchase transaction. Registration costs amounted to $2,500, paid in cash. Just prior to the acquisition, the balance sheets of the two companies were as follows: Cash Accounts receivable (net) Inventory Plant and equipment (net) Land Total assets Accounts payable Notes payable Common stock, $20 par value Other contributed capital Retained earnings Total equities Tamarisk Company $83,000 103,000 56,000 95,000 23,500 $360,500 $63,000 89,500 100,000 60,000 48,000 $360,500 Sheffield Company $12,600 18,000 25,000 46,500 22,000 $124,100 $19,500 30,000 40,000 27,500 7,100 $124,100 Any difference between the book value of equity and the value implied by the purchase price relates to goodwill.
On July 31, 2020, Mexico Company paid $3,000,000 to acquire all of the common stock of Conchita Incorporated, which became a division (a reporting unit) of Mexico. Conchita reported the following balance sheet at the time of the acquisition. Current assets $ 800,000 Current liabilities $ 600,000 Noncurrent assets 2,700,000 Long-term liabilities 500,000 Total assets $3,500,000 Stockholders' equity 2,400,000 Total liabilities and stockholders' equity $3,500,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Conchita was $2,750,000. Over the next 6 months of operations, the newly purchased division experienced operating losses. In addition, it now appears that it will generate substantial losses for the foreseeable future. At December 31, 2020, Conchita reports the following balance sheet information. Current assets $ 450,000 Noncurrent assets (including goodwill recognized in purchase)…
On May 31, 2020, Roddick Company paid $3,400,000 to acquire all of the ordinary shares of Bolt Corporation, which became a division of Roddick. Bolt reported the following statement of financial position at the time of the acquisition: Equity $2,500,000 Non-current assets $2,700,000 Non-current liabilities 500,000 Current assets 900,000 Current liabilities 600,000 Total assets $3,600,000 Total equity and liabilities $3,600,000 It was determined at the date of the purchase that the fair value of the identifiable net assets of Bolt was $2,800,000. On December 31, 2020, Bolt reports the following statement of financial position information: Current assets $ 800,000 Non-current assets (including goodwill recognized in purchase) 2,400,000 Current liabilities (700,000) Non-current liabilities (500,000) Net assets $2,000,000 It is determined that the recoverable amount value of the Bolt…