On January 1, 2017, Holland Corporation paid $7 per share to a group of Zeeland
ID: 2537921 • Letter: O
Question
On January 1, 2017, 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 Property and equipment (net) Patents $ 16,200 Liabilities 210,200 Common stock 218,600 Retained earnings $ 445,000 $ 245,000 100,000 100,000 $ 445,000 On January 1, 2017, 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, 2018, follow: Sales Cost of goods sold Depreciation expense Amortization expense Other operating expenses Equity in Zeeland earnings Separate company net income Holland $ (524,100) 265,900 65,500 16, 200 60, 800 (59,112) $(174,812) Zeeland $ (450, 500) 211,000 31,800 18,800 56,900 $ (132,000) Retained earnings 1/1 Net income Dividends declared Retained earnings 12/31 $ (822,400) $ (355,900) (174,812) (132,000) 50,000 30,000 $ (947,212) $ (457,900) $ 103,500 Current assets Investment in Zeeland Property and equipment (net) Patents Total assets $ 127,200 594,564 859,000 153,400 $ 1,734,164 281,000 178,500 $ 563,000 Liabilities Common stock - Holland Common stock - Zeeland Retained earnings 12/31 Total liabilities and owners equity $ (466, 952) $ (5,100) (320,000) 0 (100,000) (947,212) (457,900) $(1,734,164) $ (563,000)Explanation / Answer
a1-Goodwill Will be 126120 (Assumed that the value of patents shown in notes are not at all recognised in the balance sheet and it is over and above other patents already recorded in balance sheet)
a2-Controlling interest Goodwill 75672 and NCI 50448(60:40)