Question

The Holtz Corporation acquired 80 percent of the 100,000 outstanding voting shares of Devine, Inc., for $6.80 per share on January 1, 2020. The remaining 20 percent of Devine's shares also traded actively at $6.80 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 $84,000 and a fully amortized trademark with an estimated 10-year remaining life had a $81,000 fair value. At the acquisition date, Devine reported common stock of $100,000 and a retained earnings balance of $254,000. Following are the separate financial statements for the year ending December 31, 2021:

Answer 1

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. Part a,b,c 80,000*$6.80 20,000*$6.80 Fair Value Allocation and Amortization Consideration transferred by Holtz Noncontrolling interest fair value Divine total fair value 1/1/20 Divine book value 1/1/20 Fair value in excess of book value $ 544,000 $ 136,000 $ 680,000 $ (354,000) $ 326,000 Excess price allocated to undervalued Building Trademark Goodwill $ $ $ $ Life 84,000 5 years 81,000 10 years 161,000 indefinite 326,000 Amortizations $ 16,800 $ 8,100 $ $ 24,900 Change in subsidiary RE from 1/1/20 to 1/1/21 Excess amortization Adjusted subsidiary RE increase Percentage ownership by parent *C conversion entry $ 70,000 $ (24,900) $ 45,100 80% $ 36,080 Holtz Corp Divine Inc Consolidation Entries Debit Credit $ (751,000) $ (409,250) $ 249,000 $ 177,000 $ 287,000 $ 128,250 $ 24,900 $ (16,000) $ $ 16,000 $ (231,000) $ (104,000) Noncontrolling Interest Accounts Sales Cost of goods sold Operating expenses Dividend income Separate company net income Consolidated net income NCI in Divine's income Holtz's interest in consolidated income Consolidated Totals $ (1,160,250) $ 426,000 $ 440,150 $ $ $ (15,820) $ $ (294,100) 15,820 (278,280) 324,000 $ 36,080 Retained earnings, 1/1 Net income (above) Dividends paid Retained earnings, 12/31 $ $ $ $ (753,000) $ (324,000) $ (231,000) $ (104,000) 80,000 $ 20,000 (904,000) $ (408,000) $ $ 4,000 $ $ (789,080) (278,280) 80,000 (987,360) $ 16,000 $ 186,000 $ 333,000 Current assets Investment in Divine Inc $ $ 147,000 $ 544,000 $ $ 339,200 240,880 16,800 8,100 $ 900,000 $ 147,000 $ 36,080 $ $ 67,200 $ 72,900 $ 161,000 $ Buildings and equipment (net) Trademarks Goodwill Total assets $ $ 405,000 $ 145,000 $ $ 736,000 $ $ $ 1,355,400 356,800 161,000 2,206,200 $ $ 1,738,000 $

Liabilities Common stock Retained earnings, 12/31 (above) NCI in Divine, 1/1 $ $ $ (514,000) $ (228,000) (320,000) $ (100,000) $ (904,000) $ (408,000) 100,000 $ $ $ (742,000) (320,000) (987,360) $ $ 84,800 60,220 $ $ NCI in Divine, 12/31 Total liabilities and equities Part B (145,020) (156,840) $ $ (156,840) (2,206,200) $ (1,738,000) $ (736,000) $ 1,160,250 $ $ 426,000 440,150 Sales Cost of goods sold Operating expenses Total expenses Consolidated net income To 20% Noncontrolling interest To controlling interest Part C $ $ 866,150 294,100 (15,820) 309,920 $ $ Consideration transferred by Holtz for 80% of Divine $ 544,000 Add: Noncontrolling interest fair value ($5.19 20,000 shares) $ 103,800 Divine fair value $ 647,800 Less: Fair value of Divine's underlying net assets ($5.19*100,000) $ 519,000 Goodwill $ 128,800 If the Noncontrolling interest fair value was $5.19 per share at the acquisition date, then goodwill declines to $128,800