Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $5,875,000 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 $2,000,000 including retained earnings of $1,500,000 At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary: Consideration transferred Mathias stockholders' equity Excess fair over book value to unpatented technology (8-year remaining 118) to patents (10-year remaining life) to increase long-term debt (undervalued, 5-year remaining life) Goodwill $5,875,000 2,000,000 $3,875,000 $80,000 2,500,000 (100,000) 3,200,000 $ 675,000 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 $ 480,000 960,000 Dividends $ 25,000 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 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 $ (6,400,000) 4.500.000 875,000 430,000 55,000 (630,000) $ (1,170,000) $(3.200,000) 2,500,000 277.000 103,000 60.000 0 $ (960.000) $ (5,340,000) (1,170,000) 5(1,955,000) (960,000) 50.000 declared were paid in the same period. Allison Mathias $ (6,400,000) 4,500,000 875,000 430,000 55,000 630.000 $ (1,170,000) $(3,900,000) 2,500,000 277,000 103,000 60,000 5 (960,000) $ (5,340,000) (1,170,000) 563.000 $ (5,950,000) $(1,955,000) (960,000) 50,000 $(2,665,000) 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 Goodwin Total assets Accounts payable Long-term debt Common stock Retained earnings 12/31 Total liabilities and equity 5 aces 143,60 225,000 785,000 2,052,000 1,450,000 $ 75,000 950,000 1,700, see 6,580,000 3,700,000 95,000 2,125,000 425 $ 15,650,000 $ (500,000) (1,000,000) (8,200,000) (5.950.000 $(15,650,000) $ 4,655,000 $ (90,000) (1,200,000) (500,000) (2,865,000 $(4.655,000) 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
