The Holtz Corporation acquired 80 percent of the 100,000 outstanding voting shares of Devine, Inc., for $7.30 per share on January 1, 2020. The remaining
The Holtz Corporation acquired 80 percent of the 100,000 outstanding voting shares of Devine, Inc., for $7.30 per share on January 1, 2020. The remaining 20 percent of Devines shares also traded actively at $7.30 per share before and after Holtzs acquisition. An appraisal made on that date determined that all book values appropriately reflected the fair values of Devines underlying accounts except that a building with a 5-year future life was undervalued by $64,500 and a fully amortized trademark with an estimated 10-year remaining life had a $84,000 fair value. At the acquisition date, Devine reported common stock of $100,000 and a retained earnings balance of $333,500.
Following are the separate financial statements for the year ending December 31, 2021:
Holtz Corporation | Devine, Inc. | ||||||
Sales | $ | (674,000 | ) | $ | (340,250 | ) | |
Cost of goods sold | 233,000 | 166,000 | |||||
Operating expenses | 275,000 | 83,250 | |||||
Dividend income | (16,000 | ) | 0 | ||||
Net income | $ | (182,000 | ) | $ | (91,000 | ) | |
Retained earnings, 1/1/21 | $ | (783,000 | ) | $ | (403,500 | ) | |
Net income (above) | (182,000 | ) | (91,000 | ) | |||
Dividends declared | 70,000 | 20,000 | |||||
Retained earnings, 12/31/21 | $ | (895,000 | ) | $ | (474,500 | ) | |
Current assets | $ | 301,000 | $ | 196,500 | |||
Investment in Devine, Inc. | 584,000 | 0 | |||||
Buildings and equipment (net) | 825,000 | 423,000 | |||||
Trademarks | 115,000 | 181,000 | |||||
Total assets | $ | 1,825,000 | $ | 800,500 | |||
Liabilities | $ | (610,000 | ) | $ | (226,000 | ) | |
Common stock | (320,000 | ) | (100,000 | ) | |||
Retained earnings, 12/31/21 (above) | (895,000 | ) | (474,500 | ) | |||
Total liabilities and equities | $ | (1,825,000 | ) | $ | (800,500 | ) | |
At year-end, there were no intra-entity receivables or payables.
A. Prepare a worksheet to consolidate these two companies as of December 31, 2021.
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