Reference no: EM132462990
Problem - The Holtz Corporation acquired 80 percent of the 100,000 outstanding voting shares of Devine, Inc., for $7.50 per share on January 1, 2017. The remaining 20 percent of Devine's shares also traded actively at $7.50 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 $46,500 and a fully amortized trademark with an estimated 10-year remaining life had a $76,000 fair value. At the acquisition date, Devine reported common stock of $100,000 and a retained earnings balance of $351,500.
Following are the separate financial statements for the year ending December 31, 2018:
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Holtz Corporation
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Devine, Inc.
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Sales
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$(786,000)
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$(379,000)
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Cost of goods sold
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291,000
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118,000
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Operating expenses
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289,000
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78,000
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Dividend income
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(16,000)
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0
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Net income
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$(222,000)
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$(183,000)
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Retained earnings, 1/1/18
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$(733,000)
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$(421,500)
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Net income (above)
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(222,000)
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(183,000)
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Dividends declared
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90,000
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20,000
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Retained earnings, 12/31/18
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$(865,000)
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$(584,500)
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Current assets
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$311,500
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$272,500
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Investment in Devine, Inc
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600,000
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0
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Buildings and equipment (net)
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722,500
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456,000
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Trademarks
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156,000
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212,000
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Total assets
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$1,790,000
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$940,500
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Liabilities
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$(605,000)
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$(256,000)
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Common stock
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(320,000)
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(100,000)
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Retained earnings, 12/31/18
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(865,000)
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(584,500)
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Total liabilities and equities
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$(1,790,000)
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$(940,500)
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At year-end, there were no intra-entity receivables or payables.
Required -
1) Prepare a worksheet to consolidate these two companies as of December 31, 2018.
2) Prepare a 2018 consolidated income statement for Holtz and Devine.
3) If instead the noncontrolling interest shares of Devine had traded for $5.74 surrounding Holtz's acquisition date, what is the impact on goodwill?
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