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
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
| Current assets | $ | 14,000 | Liabilities | $ | 212,000 | ||
| Property and equipment (net) | 268,000 | Common stock | 100,000 | ||||
| Patents | 190,000 | 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 their carrying amounts. Any remaining excess of Zeeland’s acquisition-date fair value over its book value was attributed to
The companies’ financial statements for the year ending December 31, 2021, follow:
| Holland | Zeeland | ||||||
| Sales | $ | (640,500 | ) | $ | (428,500 | ) | |
| Cost of goods sold | 325,000 | 200,000 | |||||
| 80,000 | 34,000 | ||||||
| Amortization expense | 14,000 | 21,000 | |||||
| Other operating expenses | 52,000 | 63,500 | |||||
| Equity in Zeeland earnings | (42,300 | ) | 0 | ||||
| Separate company net income | $ | (211,800 | ) | $ | (110,000 | ) | |
| Retained earnings 1/1 | $ | (820,200 | ) | $ | (296,500 | ) | |
| Net income | (211,800 | ) | (110,000 | ) | |||
| Dividends declared | 50,000 | 30,000 | |||||
| Retained earnings 12/31 | $ | (982,000 | ) | $ | (376,500 | ) | |
| Current assets | $ | 125,000 | $ | 81,500 | |||
| Investment in Zeeland | 562,500 | 0 | |||||
| Property and equipment (net) | 837,000 | 259,000 | |||||
| Patents | 149,000 | 147,500 | |||||
| Total assets | $ | 1,673,500 | $ | 488,000 | |||
| Liabilities | $ | (371,500 | ) | $ | (11,500 | ) | |
| Common stock—Holland | (320,000 | ) | 0 | ||||
| Common stock—Zeeland | 0 | (100,000 | ) | ||||
| Retained earnings 12/31 | (982,000 | ) | (376,500 | ) | |||
| Total liabilities and owners equity | $ | (1,673,500 | ) | $ | (488,000 | ) | |
At year-end, there were no intra-entity receivables or payables.
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Prepare a worksheet to determine the amounts that should appear on Holland’s December 31, 2021, consolidated financial statements. Need help with the missing in image.
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