2 Problem 4-31 (Algo) (LO 4-3, 4-5, 4-7) 6 points 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 Property and equipment (net) Patents $ 14,600 Liabilities $221,000 228,600 Common stock 100,000 197,800 $441,000 Retained earnings 120,000 $441,000 On January 1, 2020, Holland assessed the carrying amount of Zeeland's equipment (5-year remaining life) to be undervalued by $61,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $258,300. 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, 2021, follow: 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 Zeeland $ (710,700) $(434,500) 360,400 203,000 89,000 33,400 14,600 20,400 54,400 61,700 (46,782) 0 $ (239,082) $(116,000) $ (820,800) $(312,700) (239,082) 50,000 (116,000) 30,000 $(1,009,882) $(398,700) 125,600 $ 87,500 541,584 843,000 150,200 0 265,000 153,500 $ 1,660,384 $ 506,000 $ (330,502) $ (7,300) (320,000) 0 0 (100,000) (398,700) (1,009,882) $ (1,660,384) $(506,000) At year-end, there were no intra-entity receivables or payables. a. 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, 2021, Investment in Zeeland account balance. c. Prepare a worksheet to determine the amounts that should appear on Holland's December 31, 2021, consolidated financial statements. worksheet. Input all amounts as positive values.) Show less HOLLAND CORPORATION AND ZEELAND CORPORATION 2 Retained earnings 12/31 Total liabilities and owners equity (1,009,882) (398,700) $(1,660,384) $(506,000) 6 points At year-end, there were no intra-entity receivables or payables. a. 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, 2021, Investment in Zeeland account balance. c. Prepare a worksheet to determine the amounts that should appear on Holland's December 31, 2021, consolidated financial statements. worksheet. Input all amounts as positive values.) HOLLAND CORPORATION AND ZEELAND CORPORATION Consolidation Worksheet For Year Ending December 31, 2021 Show less Consolidation Entries Noncontrolling Accounts Holland Zeeland Debit Credit Interest Consolidated Totals $ Sales $ (710,700) $ (1,145,200) Cost of goods sold 360,400 (434,500) 203,000 563,400 Depreciation expense 89,000 Amortization expense 14,600 33,400 12,200 20,400 25,830 134,600 60,830 Other operating 54,400 61,700 116,100 expenses Equity in Zeeland (46,782) 0 46,782 earnings Separate company net $ $ (239,082) income Consolidated net (116,000) income Noncontrolling interest in CNI Controlling interest net income Retained earnings 1/1 Net income Dividends declared $ $ (820,800) 312,700 (239,082) 50,000 (312,700) |(116,000) 30,000 18,000 12,000 (31,188) $ (270,270) 31,188 $ (239,082) $ (820,800) (239,082) 50,000 Retained earnings $ $ 12/31 (1,009,882) Current assets $ 125,600 (398,700) $ 87,500 $ (1,009,882) $ 213,100 Investment in Zeeland, 541,584 0 18,000 559,584 Inc Property and 843,000 265,000 equipment (net) Patents 150,200 153,500 48,800 12,200 232,470 25,830 Goodwill 0 0 100,700 Total assets $1,660,384 Liabilities (330,502) $ 506,000 (7,300) Common stock (320,000) (100,000) 100,000 Noncontrolling interest Retained earnings (1,009,882) (398,700) 12/31 Total liabilities and equities $ $ $ $ (1,660,384) (506,000) 897,482 897,482 1,144,600 510,340 100,700 S 1,968,740 (337,802) (320,000) 281,868 (281,868 X (301,056) (1,009,882) $ (1,968,740) < Req A and B Req C