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 acquisition-date fair value over its book value was attributed to goodwill. The companies' financial statements for the year ending December 31, 2024, follow: es Account 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 Total liabilities and owners' equity Holland $ (524,100) 265,900 Zeeland $ (450,500) 211,000 65,500 31,800 16,200 18,800 60,800 (59,112) 56,900 0 $ (174,812) $ (822,400) (174,812) 50,000 $ (947,212) $ 127,200 594,564 859,000 153,400 $ 1,734,164 $ (466,952) (320,000) $ (132,000) $ (355,900) (132,000) 30,000 $ (457,900) $ 103,500 0 281,000 178,500 $ 563,000 $ (5,100) 0 (100,000) (457,900) 0 (947,212) $ $ (563,000) (1,734,164) 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 fina statements.

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 acquisition-date fair value over its book value was attributed to goodwill. The companies' financial statements for the year ending December 31, 2024, follow: es Account 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 Total liabilities and owners' equity Holland $ (524,100) 265,900 Zeeland $ (450,500) 211,000 65,500 31,800 16,200 18,800 60,800 (59,112) 56,900 0 $ (174,812) $ (822,400) (174,812) 50,000 $ (947,212) $ 127,200 594,564 859,000 153,400 $ 1,734,164 $ (466,952) (320,000) $ (132,000) $ (355,900) (132,000) 30,000 $ (457,900) $ 103,500 0 281,000 178,500 $ 563,000 $ (5,100) 0 (100,000) (457,900) 0 (947,212) $ $ (563,000) (1,734,164) 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 fina statements.

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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