Problem 3-25 (Algo) (LO 3-1, 3-3a, 3-4) Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $6,285,000 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 $2,100,000 including retained earnings of $1,600,000. At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary: $6,285,000 2,100,000 $4, 185,000 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 $ 960,000 2,700,000 (200,000) 3,460,000 $ 725,000 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 $ 442,500 885,000 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 $ (6,800,000) 4,780,000 975,000 480,000 95,000 (535,000) $ (1,005, 000) $(4,000,000) 2,565,000 337,000 133,000 80,000 $ (885,000) $ (5,540,000) (1,005, 000) 560,000 $ (5,985,000) $(2,017,500) (885,000) 50,000 $(2,852,500) 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 Total assets Accounts payable Long-term debt Common stock Retained earnings 12/31 Total liabilities and equity $ 173,000 275,000 885,000 0 2,122,000 $ 105,000 1,050,000 1,900,000 6,837,500 3,900,000 145,000 2,225,000 495,000 $ 16,657,500 $ (1,472,500) (1,000,000) (8,200,000) (5,985,000) $(16,657,500) 1,550,000 0 $ 5,005,000 $ (452,500) (1,200,000) (500,000) (2,852,500) $(5,005,000) Required: a. Determine the annual excess fair over book value amortization. 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 annual excess fair over book value amortization. Annual excess fair over book value amortization Required B > This is a numeric cell, so please enter numbers only. 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. Input all amounts as positive values.) Show less ALLISON CORPORATION AND CONSOLIDATED SUBSIDIARY Consolidation Worksheet For Year Ending December 31, 2021 Consolidation Entries Accounts Allison Mathias Debit Credit Consolidated Totals Income Statement Revenues $ 10,800,000 7.345.000 1,312,000 Cost of goods sold Depreciation expense Amortization expense Interest expense Equity earnings in Mathias Net income $ (6.800.000) $ 4.000.000) 4.780,000 2.565,000 975.000 337.000 480,000 133,000 95.000 80.000 (535.000) S (1.005.000) (885,000) 535.000 Statement of Retained Earnings Retained earnings 1/1 Net income (above) Dividends declared Retained earnings 12/31 (5.540.000) (1.005.000) 560.000 $ (5.985.000) (2.017.500) (885.000) 50.000 $ (2.852,500) 50,000 s $ 105,000 1,050.000 1,900,000 173,000 275.000 885,000 Balance Sheet Cash Accounts receivable Inventories Investment in Mathias Equipment (net) Patents Unpatented technology Goodwill 50.000 2,122,000 8,837,500 3.900.000 145.000 2.225,000 495.000 $ 18,657.500 2.430,000 840.000 725.000 270.000 120.000 1.550.000 Total assets $ 5,005,000 80.000 Accounts payable Long-term debt Common stock Retained earnings 12/31 Total liabilities and equity (1.472.500) (1.000.000) (8.200.000) (5.985,000) $(10.657.500 (452,500) (1.200,000) (500,000) (2.852,500) $ (5.005.000) 20,000 500.000 $ 5,100,000 $ 520,000 $ 18,430.000