The Holtz Corporation acquired 80 percent of the 100,000 outstanding voting shar

Question

The Holtz Corporation acquired 80 percent of the 100,000 outstanding voting shares of Devine, Inc., for $770 per share on January 1 2017. The remaining 20 percent of Devine's shares also traded actively at $770 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 $81,000 and a fully amortized trademark with an estimated 10-year remaining life had a $75,000 fair value. At the acquisition date, Devine reported common stock of $100,000 and a retained earnings balance of $290,000 Following are the separate financial statements for the year ending December 31, 2018 Holtz Corporation $ (760,000) Devine Inc. Sales Cost of goods sold Operating expenses Dividend income (365,250) 133,000 107,258 234,000 319,00e 16,000 (223,000) (709,000) (223,000) 90,000 (842,000) Net income (125,000) Retained earnings, 1/1/18 Net income (above) Dividends declared (360,000) (125,000) 20,000 (465,000) Retained earnings, 12/31/18 Current assets Investment in Devine, Inc Buildings and equipment (net) Trademarks 166,00 $ 19 0 616,000 905,00e 160,000 $ 1,847,000 389,000 220,9e_ $ 814,000 Total assets Liabilities Common stock Retained earnings, 12/31/18 (above) (685,000) (320,000) 842,00e (249,000) (100,000) 465,000 Total liabilities and equities $ (1,847,000) $ (814,00e At year-end, there were no intra-entity receivables or payables. a. Prepare a worksheet to consolidate these two companies as of December 31, 2018 b. Prepare a 2018 consolidated income statement for Holtz and Devine c. If instead the noncontrolling interest shares of Devine had traded for $5.46 surrounding Holtz's acquisition date, what is the impact on goodwill?

Explanation / Answer

a:-

Consolidation Worksheet:-

For year ending DECEMBER 31,2018:-

b:-

c:-

Consolidation Entries Non controlling Consolidate Tools Accounts Holtz's Corporation Devine Inc. Debit Credit Interest sales -$760000 -$365250 -$1125250 cost of goods sold $234000 $133000 $367000 operating expenses $319000 $1072550 (E) $23700 $449950 dividend income -$16000 0 (I) $16000 0 separate company net income -$223000 -$125000 -$308300 NCI in devine's income -$23700 $23700 Holtz's interest in consolidated income -$284600 Retained earnings,(1/1) -$709000 -$360000 (S) $360000 $30860 (C) -$678140 Net income(above) -$223000 -$125000 -$284600 Dividends paid $90000 $20000 $16000 (I) $4000 $90000 retained earnings,(12/31) -$842000 -$465000 -$872740 Current assets $166000 $199000 $365000 investment in devine $616000 (C) $30860 $368000 (S) Buildings and developement (net) $905000 $389000 (A) $64800 $16200 (E) $1342600 Trademarks $160000 $226000 (A) $60000 $15000 $431000 Goodwill (A) $156000 $156000

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