Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $5,998,000 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 $2,030,000 including retained earnings of $1,530,000 At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary: $5,998, eee 2,83e, eee $3,968, eee 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 $ 848, eee 2,560,eee (130, eee) 3, 278, eee $ 690, eee 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: 2020 2021 Income $ 468,750 937,500 Dividends $ 25,000 50,000 No asset impairments have occurred since the acquisition date. 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 $ (6,520,000) 4,584,000 905,000 445,000 67,000 (601,500) $ (1,120, 500) $(3,930,000) 2,519,500 295,000 112, eee 66, ese e $ (937,500) Income Statement Sales Cost of goods sold Depreciation expense Amortization expense Interest expense Equity earnings in Mathias Net income 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 $ (5,40e, eee) (1,120,500) 560,000 $ (5,960,580) $(1,973,750) (937,500) 50,000 $(2,861,250) $ $ 152,000 240,000 815, eee 84,000 980, eee 1,760, eee 6,657,250 3,760,000 110, eee 2,155, eee 446,00 2,073, eee 1,480,000 - -- 1,480,000 ---- Patents Unpatented technology Goodwill Total assets Accounts payable Long-term debt Common stock Retained earnings 12/31 Total liabilities and equity 110,000 2,155,000 446,000 $ 15,952, 250 $ (791,750) (1,000,000) (8,200,000) (5,960,500) $(15,952,250) $ 4,760,000 $ (198,750) (1,200,000) (5ee, eee) (2,861,250) $(4,760,000) Required: a. Determine the fair value in excess of book value for Allison's acquisition date investment in Mathias.I b. Prepare a worksheet to determine the consolidated values to be reported on Allison's financial statements. Required: a. Determine the fair value in excess of book value for Allison's acquisition date investment in Mathias. 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 fair value in excess of book value for Allison's acquisition date investment in Mathias. Fair value in excess of book value
