On January 1, 2023, Holland Corporation paid $8 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 $6.50 per share both before and after the acquisition by Holland.
Zeeland's acquisition date balance sheet follows:
Current assets $ 14,000 Liabilities $ 212,000
Property and equipment (net) 268,000 common stock 100,000
Patents 190,000 Retained earnings 160,000
$ 472,000 $ 472,000
On January 1, 2023, Holland assessed the carrying amount of Zeeland's equipment (5-year remaining life) to be undervalued by
$55,000. Holland also determined that Zeeland possessed unrecorded patents (10-year remaining life) worth $285,000. 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, 2024, follow:
Account Holland Zeeland
Sales $ (640,500) $ (428,500)
Cost of goods sold 325,000 200,000
Depreciation expense 80,000 34,000
Amortization expense 14,000 21,000
Other operating expenses 52,000 63,500
Equity in Zeeland earnings (42,300) 0
Separate company net income $ (211,800) $ (110,000)
Retained earnings, 1/1 $ (820,200) $ (296,500)
Net income (211,800) (110,000)
Dividends declared 50,000 30,000
Retained earnings, 12/31 $ (982,000) $ (376,500)
Current assets $ 125,000 $ 81,500
Investment in Zeeland 562,500 0
Property and equipment (net) 837,000 259,000
Patents 149,000 147,500
Total assets $ 1,673,500 $ 488,000
Liabilities $ (371,500) $ (11,500)
Common stock-Holland (320,000) 0
Common stock-Zeeland 0 (100,000)
Retained earnings, 12/31 (982,000) (376,500)
Total liabilities and owners' equity $ (1,673,500) $ (488,000)
At year-end, there were no intra-entity receivables or payables.
Required:
a1. Compute the amount of goodwill recognized In Holland's acquisition of Zeeland.
a2. Show the allocation of goodwill to the controlling and noncontrolling Interest.
b. Show how Holland determined Its December 31, 2024, Investment In Zeeland account balance.
c. Prepare a worksheet to determine the amounts that should appear on Holland's December 31, 2024, consolidated financial
statements.
