Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $5,936,500 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 $2,015,000 including retained earnings of $1,515,000.

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

Consideration transferred$5,936,500Mathias stockholders' equity2,015,000Excess fair over book value$3,921,500to unpatented technology (8-year remaining life)$824,000to patents (10-year remaining life)2,530,000to increase long-term debt (undervalued, 5-year remaining life)(115,000)3,239,000Goodwill$682,500

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:

IncomeDividends2020$474,375$25,0002021948,75050,000

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.

AllisonMathiasIncome StatementSales$(6,460,000)$(3,915,000)Cost of goods sold4,542,0002,509,750Depreciation expense890,000286,000Amortization expense437,500107,500Interest expense61,00063,000Equity earnings in Mathias(615,750)0Net income$(1,145,250)$(948,750)Statement of Retained EarningsRetained earnings 1/1$(5,370,000)$(1,964,375)Net income (above)(1,145,250)(948,750)Dividends declared560,00050,000Retained earnings 12/31$(5,955,250)$(2,863,125)Balance SheetCash$79,500$147,500Accounts receivable965,000232,500Inventory1,730,000800,000Investment in Mathias6,618,6250Equipment (net)3,730,0002,062,500Patents102,5000Unpatented technology2,140,0001,465,000Goodwill435,5000Total assets$15,801,125$4,707,500Accounts payable$(645,875)$(144,375)Long-term debt(1,000,000)(1,200,000)Common stock(8,200,000)(500,000)Retained earnings 12/31(5,955,250)(2,863,125)Total liabilities and equity$(15,801,125)$(4,707,500)

Required:

Determine the annual excess fair over book value amortization.