DO NOT COPY & PASTE OLD SOLUTION! THIS IS 2018 QUESTION! The Holtz Corporation a
ID: 2332918 • Letter: D
Question
DO NOT COPY & PASTE OLD SOLUTION!
THIS IS 2018 QUESTION!
The Holtz Corporation acquired 80 percent of the 100,000 outstanding voting shares of Devine, Inc., for $7.30 per share on January 1, 2017. The remaining 20 percent of Devine's shares also traded actively at $7.30 per share before and after Holtz's acquisition. An appraisal made on that date determined that all book values appropriately reflected the fair values of Devine's 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, 2018 Holtz Corporation Devine Inc. n50 $ (674,000) (340,250) Sales Cost of goods sold Operating expenses Dividend income 233,000 275,000 (16,000) (182,000) 166,000 83,250 $ (91,000) $ (783,000) (403,500) (91,000) Net income Retained earnings, 1/1/18 Net income (above) Dividends declared (182,000) 70,000 20,000 $(895,000) (474,500) Retained earnings, 12/31/18 Current assets Investment in Devine, Inc Buildings and equipment (net) Trademarks s 301,000 $196 500 584,000 825,000 115,000 $1,825,000 423,000 181,000 $ 800,500 Total assets Liabilities Common stock Retained earnings, 12/31/18 (above) (320,000) (895,000) (1,825,000) $ (610,000) (226,000) (100,000) (474,500) (800,500) Total liabilities and equities At year-end, there were no intra-entity receivables or payables a. Prepare a worksheet to consolidate these two companies as of December 31, 2018Explanation / Answer
a Consolidation worksheet Consolidation Entries Noncontrolling Interest Consolidated Totals Accounts Holtz Corporation Devine Inc. Debit Credit Sales ($674,000) ($340,250) ($1,014,250) Cost of Goods Sold $233,000 $166,000 $399,000 Operating expenses $275,000 $83,250 $21,300 $379,550 Dividend Income ($16,000) $16,000 $0 Separate corporate net income ($182,000) ($91,000) Consolidated net income ($235,700) NI attributable to noncontrolling interest ($18,200) ($18,200) NI attributable to Holtz Corporation ($217,500) Retained earnings, 1/1 ($783,000) ($403,500) $403,500 $34,700 ($817,700) Net income ($182,000) ($91,000) ($217,500) Dividend declared $70,000 $20,000 $16,000 $4,000 $70,000 Retained earnings, 12/31 ($895,000) ($474,500) ($965,200) $0 Current Assets $301,000 $196,500 $497,500 Investment in Devine $584,000 $0 $584,000 $0 Buildings and equipment (net) $825,000 $423,000 $51,600 $12,900 $1,286,700 Trademarks $115,000 $181,000 $75,600 $8,400 $363,200 Goodwill $0 $0 $148,000 $148,000 Total Assets $1,825,000 $800,500 $2,295,400 $0 Liabilities ($610,000) ($226,000) ($836,000) Common Stock ($320,000) ($100,000) $100,000 ($320,000) Retained earnings, 12/31 ($895,000) ($474,500) ($965,200) NCI in Devine, 1/1 $160,000 ($160,000) NCI in Devine, 12/31 -174200 ($174,200) Total Liabilities and equities ($1,825,000) ($800,500) $816,000 $816,000 ($2,295,400) Working Note: Total Holtz Corp. NCI 1 Fair value of outstanding stock $730,000 $584,000 $146,000 Less: Book Value of stock ($100,000) ($80,000) ($20,000) Retained Earnings ($333,500) ($266,800) ($66,700) Excess of fair value over book value $296,500 $237,200 $59,300 Excess allocated to: Building $64,500 $51,600 $12,900 Trademark $84,000 $67,200 $16,800 Goodwill $148,000 $118,400 $29,600 2 Depreciation and amortization Building $64,500 Useful life 5 Depreciation $12,900 Trademark $84,000 Useful life 10 Amortization $8,400
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