Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2017, in exchange for $6,162,000 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 $2,070,000 including retained earnings of $1,570,000. At the acquisition date, Allison prepared the following fair value allocation schedule for its newly acquired subsidiary: $6,162,000 2,070,000 $4,092,000 Consideration transferred Mathias stockholders' equity Excess fair over book value to unpatented technology (8-year remaining life) to patents (18-year remaining life) to increase long-term debt (undervalued, 5-year remaining life) Goodwill $ 912,000 2,640,000 (170,000) 3,382,000 $ 719,00 Post-acquisition, Allison employs the equ 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 $ 453,750 907,500 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 $ (6,600,000) 4,696,000 945,000 465,000 83,000 (563, 500) $ (1,054,500) $(3,970,000) 2,545, 500 319.000 124,000 74,000 e $(907,500) Income Statement Sales Cost of goods sold Depreciation expense Amortization expense Interest expense Equity earnings In Mathias Net income Statenent of Retained Earnings Retained earnings 1/1 Net Income (above) Dividends declared Retained earnings 12/31 Balance Sheet Cash Accounts receivable $ (5,450,000) (1,054,500) 560,000 5 (5,974,500) $(1,998,750 (907,500) 50.000 $(2,656,250) 5 5 96,000 1.020.000 164,000 260.000 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 $ (6,680,000) 4,696,000 945,000 465,000 83,000 (563,500) $ (1,054,500) $(3,970,000) 2,545,500 319, eee 124,000 74,000 $ (907,500) $ (5,480,000) (1,054,500) 560,000 $ (5,974,500) $(1,998,750) (907,500) 50,000 $(2,856,250) 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 Total assets Accounts payable Long-term debt Common stock Retained earnings 12/31 Total liabilities and equity $ 164, eee 260,000 855,000 2,101,000 1,520,000 5 96,000 1,020,000 1,840,000 6,760,250 3,840,000 130,000 2,195,000 474,000 $ 16,355, 250 $ (1,180,750) $ (1,000,000) (8,200,000) (5,974,500) 5(16,355,250) $ 4,900,000 $ (343,750) $(1,200,000) (500,000) (2.856,250) $(4,900,000) Required: a. Determine Allison's December 31, 2018. Investment in Mathias balance. 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.
