Question

On January 1, 2017, Holland Corporatlon pald $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 remalning 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 acquisitlon date balance sheet follows: 236, 000 $ 15, 600 Liabilities Common stock Current assets Property and equipment net) 329, 600 100, 000 Retained earnings Patents 210, 800 220, 000 $556, 000 556, 000 On January 1, 2017, Holland assessed the carrying amount of Zeeland's equipment (5-year remaining life) to be undervalued by $51,000. Holland also determlined that Zeeland possessed unrecorded patents (10-year remaining life) worth $419,900. Zeeland's acquisition-date fair values for Its current assets and liabilities were equal to thelr carrying amounts. Any remaining excess of Zeeland's acquisition-date falr value over Its book value was attributed to goodwill. The companles' financlal statements for the year ending December 31, 2018, follow Holland Zeeland $ (594, 300) (444, 500) Sales Cost of goods sold Depreciation expense Am ortizati on expense Other operating expenses Equi ty in Zeeland earnings 301, 300 208, 000 74, 500 32, 400 19, 400 15, 600 58, 700 58, 400 (44, 286) (188, 786) 0 (126, 000) Separate company net income (339, 700) (126, 000) Retained earnings 1/1 Net income Dividends declared (821, 800) (188, 786) $ 50, 000 30, 000 (435, 700) $ (960, 586) Retained earnings 12/31 $ 606, 792 853, 000 Current assets 126, 600 97, 500 Investment in Zeeland Property and equipment (net) 275, 000 167, 500 Patents 152, 200 1, 738, 592 540, 000 Total assets $(458, 006) (4, 300) Liabilities $ (320, 000) Holland Common stock (100, 000) (435, 700) Zeeland Common stock (960, 586) Retained earnings 12/31 (540, 000) $(1, 738, 592) Total liabilities and owners equity At year-end, there were no intra-entity recelvables or payables. Compute the amount of goodwill recognized In Holland's acquisition of Zeeland and the allocation of goodwill to the controlling and noncontrolling Interest b. Show how Holland determined Its December 31, 2018, Investment in Zeeland account balance. a. c. Prepare a worksheet to determine the amounts that should appear on Holland's December 31, 2018, consolidated financlal statements.

Answer 1

(a) GOODWILL

  PARENT NCI TOTAL

Fair value of consideration 540000 320000 880000

Proportionate FV of net assets (60%/40%) 474540 316360 790900

Goodwill 65460 3640 89100

Now prepare the tables required to be prepared at the time of consolidation of financial statements like Cost of Capital, Minority Interest (NCI) etc and find respective answers.