Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2017, in exchange for $5,916,000 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 $2,010,000 including retained earnings of $1,510,000. At the acquisition date, Allison prepared the following fair value allocation schedule for its newly acquired subsidiary: $5,916,000 2,010,000 $3,906,000 Consideration transferred Mathias stockholders' equity Excess fair over book value to unpatented technology (8-year remaining life) to patents (10-year remaining life) to increase long-term debt (undervalued, 5-year remaining life) Goodwill $ 816,000 2,520,000 (110,000) 3,226,000 680,000 $ Post-acquisition, 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: 2017 2018 Income $ 476,250 952,500 Dividends $ 25,000 50,000 No asset impairments have occurred since the acquisition date. Individual financial statements for each company as of December 31, 2018, appear below. Parentheses indicate credit balances. Dividends declared were paid in the same period. Allison Mathias Income Statement Sales Cost of goods sold Depreciation expense Amortization expense Interest expense Equity earnings in Mathias Net income $ (6,440,000) 4,528,000 885,000 435,000 59,000 (620, 500) $ (1,153,500) $(3,910,000) 2,506,500 283,000 106,000 62,000 $ (952,500) $ (5,360,000) (1,153,500) 560,000 $ (5,953,500) $(1,961,250) (952,500) 50,000 $(2,863,750) 146,000 230,000 795,000 Statement of Retained Earnings Retained earnings 1/1 Net income (above) Dividends declared Retained earnings 12/31 Balance Sheet Cash Accounts receivable Inventory Investment in Mathias Equipment (net) Patents Unpatented technology Goodwill Total assets Accounts payable Long-term debt Common stock Retained earnings 12/31 Total liabilities and equity 2,059,000 0 1,460,000 78,000 960,000 1,720,000 6,605,750 3,720,000 100,000 2,135,000 432,000 $ 15,750,750 $ (597,250) $ (1,000,000) (8,200,000) (5,953,500) $(15,750,750) $ 4,690,000 $ (126,250) $(1,200,000) (500,000) (2,863,750) $(4,690,000) 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 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. Amounts in the Debit and Credit columns should be entered as positive. Negative amounts for the Consolidated Totals column should be entered with a minus sign.) Show less ALLISON CORPORATION AND CONSOLIDATED SUBSIDIARY Consolidation Worksheet For Year Ending December 31, 2018 Consolidation Entries Accounts Allison Mathias Debit Credit Consolidated Totals Income Statement Revenues Cost of goods sold Depreciation expense Amortization expense Interest expense Equity earnings in Mathias Net income $ (6,440,000) $ (3,910,000) 4,528,000 2,506,500 885,000 283,000 435,000 106,000 59,000 62,000 (620,500) $ (1,153,500) $ (952,500) 0 Statement of Retained Earnings Retained earnings 1/1 (5,360,000) (1,961,250) Statement of Retained Earnings Retained earnings 1/1 Net income (above) Dividends declared 0 (5,360,000) (1,153,500) 560,000 $ (5,953,500) (1,961,250) (952,500) 50,000 $ (2,863,750) Retained earnings 12/31 0 Balance Sheet Cash $ 78,000 $ 146,000 230,000 Accounts receivable 795,000 Inventories Investment in Mathias Equipment (net) 2,059,000 960,000 1,720,000 6,605,750 3,720,000 100,000 2,135,000 432,000 $ 15,750,750 Patents 1,460,000 Unpatented technology Goodwill Total assets $ 4,690,000 $ 0 Accounts payable Long-term debt Common stock (597,250) (126,250) (1,000,000) (1,200,000) (8,200,000) (500,000) (5,953,500) (2,863,750) $(15,750,750) $ (4,690,000) $ 0 Retained earnings 12/31 Total liabilities and equity 0 $ 0 $ 0 Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2017, in exchange for $5,916,000 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 $2,010,000 including retained earnings of $1,510,000. At the acquisition date, Allison prepared the following fair value allocation schedule for its newly acquired subsidiary: $5,916,000 2,010,000 $3,906,000 Consideration transferred Mathias stockholders' equity Excess fair over book value to unpatented technology (8-year remaining life) to patents (10-year remaining life) to increase long-term debt (undervalued, 5-year remaining life) Goodwill $ 816,000 2,520,000 (110,000) 3,226,000 680,000 $ Post-acquisition, 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: 2017 2018 Income $ 476,250 952,500 Dividends $ 25,000 50,000 No asset impairments have occurred since the acquisition date. Individual financial statements for each company as of December 31, 2018, appear below. Parentheses indicate credit balances. Dividends declared were paid in the same period. Allison Mathias Income Statement Sales Cost of goods sold Depreciation expense Amortization expense Interest expense Equity earnings in Mathias Net income $ (6,440,000) 4,528,000 885,000 435,000 59,000 (620, 500) $ (1,153,500) $(3,910,000) 2,506,500 283,000 106,000 62,000 $ (952,500) $ (5,360,000) (1,153,500) 560,000 $ (5,953,500) $(1,961,250) (952,500) 50,000 $(2,863,750) 146,000 230,000 795,000 Statement of Retained Earnings Retained earnings 1/1 Net income (above) Dividends declared Retained earnings 12/31 Balance Sheet Cash Accounts receivable Inventory Investment in Mathias Equipment (net) Patents Unpatented technology Goodwill Total assets Accounts payable Long-term debt Common stock Retained earnings 12/31 Total liabilities and equity 2,059,000 0 1,460,000 78,000 960,000 1,720,000 6,605,750 3,720,000 100,000 2,135,000 432,000 $ 15,750,750 $ (597,250) $ (1,000,000) (8,200,000) (5,953,500) $(15,750,750) $ 4,690,000 $ (126,250) $(1,200,000) (500,000) (2,863,750) $(4,690,000) 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 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. Amounts in the Debit and Credit columns should be entered as positive. Negative amounts for the Consolidated Totals column should be entered with a minus sign.) Show less ALLISON CORPORATION AND CONSOLIDATED SUBSIDIARY Consolidation Worksheet For Year Ending December 31, 2018 Consolidation Entries Accounts Allison Mathias Debit Credit Consolidated Totals Income Statement Revenues Cost of goods sold Depreciation expense Amortization expense Interest expense Equity earnings in Mathias Net income $ (6,440,000) $ (3,910,000) 4,528,000 2,506,500 885,000 283,000 435,000 106,000 59,000 62,000 (620,500) $ (1,153,500) $ (952,500) 0 Statement of Retained Earnings Retained earnings 1/1 (5,360,000) (1,961,250) Statement of Retained Earnings Retained earnings 1/1 Net income (above) Dividends declared 0 (5,360,000) (1,153,500) 560,000 $ (5,953,500) (1,961,250) (952,500) 50,000 $ (2,863,750) Retained earnings 12/31 0 Balance Sheet Cash $ 78,000 $ 146,000 230,000 Accounts receivable 795,000 Inventories Investment in Mathias Equipment (net) 2,059,000 960,000 1,720,000 6,605,750 3,720,000 100,000 2,135,000 432,000 $ 15,750,750 Patents 1,460,000 Unpatented technology Goodwill Total assets $ 4,690,000 $ 0 Accounts payable Long-term debt Common stock (597,250) (126,250) (1,000,000) (1,200,000) (8,200,000) (500,000) (5,953,500) (2,863,750) $(15,750,750) $ (4,690,000) $ 0 Retained earnings 12/31 Total liabilities and equity 0 $ 0 $ 0