Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January $1,2020,$ in exchange for $$6,182,500$ in cash. Allison intends to maintain Mathias as a wholly owned subsidiary. Both companies have December $31$ fiscal year$-$ends. At the acquisition date, Mathias$$s stockholders$$ equity was $$2,075,000$ including retained earnings of $$1,575,000.$

At the acquisition date, Allison prepared the following fair$-$value allocation schedule for its newly acquired subsidiary:

Consideration transferred $ $6,182,500$

Mathias stockholders' equity $2,075,000$

Excess fair over book value $ $4,107,500$

to unpatented technology $(8-$year remaining life$)$ $ $920,000$

to patents $(10-$year remaining life$)2,650,000$

to increase long$-$term debt $($undervalued$,5-$year remaining life$)(175,000)3,395,000$

Goodwill $ $712,500$

Postacquisition, Allison employs the equity method to account for its investment in Mathias. During the two years following the business combination, Mathias reports the following income and dividends:

Income Dividends

$2020$ $ $451,875$ $ $25,000$

$2021903,75050,000$

No asset impairments have occurred since the acquisition date.

Individual financial statements for each company as of December $31,2021,$ follow. Parentheses indicate credit balances. Dividends declared were paid in the same period.

Allison Mathias

Income Statement

Sales $ $(6,700,000)$ $ $(3,975,000)$

Cost of goods sold $4,710,0002,548,750$

Depreciation expense $950,000322,000$

Amortization expense $467,500125,500$

Interest expense $85,00075,000$

Equity earnings in Mathias $(558,750)0$

Net income $ $(1,046,250)$ $ $(903,750)$

Statement of Retained Earnings

Retained earnings $1/1$ $ $(5,490,000)$ $ $(2,001,875)$

Net income $($above$)(1,046,250)(903,750)$

Dividends declared $560,00050,000$

Retained earnings $12/31$ $ $(5,976,250)$ $ $(2,855,625)$

Balance Sheet

Cash $ $97,500$ $ $165,500$

Accounts receivable $1,025,000262,500$

Inventory $1,850,000860,000$

Investment in Mathias $6,773,1250$

Equipment $($net$)3,850,0002,104,500$

Patents $132,5000$

Unpatented technology $2,200,0001,525,000$

Goodwill $477,5000$

Total assets $ $16,405,625$ $ $4,917,500$

Accounts payable $ $(1,229,375)$ $ $(361,875)$

Long$-$term debt $(1,000,000)(1,200,000)$

Common stock $(8,200,000)(500,000)$

Retained earnings $12/31(5,976,250)(2,855,625)$

Total liabilities and equity $ $(16,405,625)$ $ $(4,917,500)$

Required:

Determine the annual excess fair over book value amortization.

Prepare a worksheet to determine the consolidated values to be reported on Allison$$s financial statements.