Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $6,059,500 in cash. Allison intends to maintain Mathias as a wholly owned subsidiary. Both companies have December 31 fiscal year-ends. At the acquisition date, Mathiass stockholders equity was $2,045,000 including retained earnings of $1,545,000.

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

Consideration transferred $6,059,500

Mathias stockholders' equity 2,045,000

Excess fair over book value $4,014,500

to unpatented technology (8-year remaining life) $872,000

to patents (10-year remaining life) 2,590,000

to increase long-term debt (undervalued, 5-year remaining life) (145,000) 3,317,000

Goodwill $697,500

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 $463,125 $25,000

2021 926,250 50,000

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$(6,580,000) $(3,945,000)

Cost of goods sold 4,626,000 2,529,250

Depreciation expense 920,000 304,000

Amortization expense 452,500 116,500

Interest expense 73,000 69,000

Equity earnings in Mathias (587,250) 0

Net income$(1,095,750) $(926,250)

Statement of Retained Earnings

Retained earnings 1/1$(5,430,000) $(1,983,125)

Net income (above) (1,095,750) (926,250)

Dividends declared 560,000 50,000

Retained earnings 12/31 $(5,965,750) $(2,859,375)

Balance Sheet

Cash $88,500 $156,500

Accounts receivable 995,000 247,500

Inventory 1,790,000 830,000

Investment in Mathias 6,695,875 0

Equipment (net) 3,790,000 2,083,500

Patents 117,500 0

Unpatented technology 2,170,000 1,495,000

Goodwill 456,500 0

Total assets$16,103,375 $4,812,500

Accounts payable$(937,625) $(253,125)

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

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

Retained earnings 12/31 (5,965,750) (2,859,375)

Total liabilities and equity$(16,103,375) $(4,812,500)

a. Determine the annual excess fair over book value amortization. b. Prepare a worksheet to determine the consolidated values to be reported on Allison's financial statements. Complete this question by entering your answers in the tabs below. Required a Required B Determine the annual excess fair over book value amortization. Annual excess fair over book value amortization Prepare a worksheet to determine the consolidated values to be reported on Allison's financial statements. (For accounts where multiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit column of the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of the worksheet. Input all amounts as positive values.) Show less ALLISON CORPORATION AND CONSOLIDATED SUBSIDIARY Consolidation Worksheet For Year Ending December 31, 2021 Consolidation Entries Accounts Allison Mathias Consolidated Debit Credit Totals Income Statement Revenues $ (6,580,000) $ (3,945,000) Cost of goods sold 4,626,000 2,529,250 Depreciation expense 920,000 304,000 Amortization expense 452,500 116,500 Interest expense 73,000 69,000 Equity earnings in Mathias (587,250) Net income $ (1,095,750) $ (926,250) Statement of Retained Earnings Retained earnings 1/1 Net income (above) Dividends declared Retained earnings 12/31 (5,430,000) (1.983,125) (1,095,750) (926,250) 560,000 50,000 $ (5,965,750) $ 2,859,375) Balance Sheet Cash $ 88,500 $ 156,500 unterlinin El AYA