Problem 3-25 (Static) (LO 3-1, 3-3a, 3-4) Allison Corporation acquired all of the outstanding voting stock of Mathias, Incorporated, on January 1, 2023, 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 life) to patents (10-year remaining life) to increase long-term debt (undervalued, 5-year remaining life) Goodwill $ 800,000 2,500,000 (100,000) $ 5,875,000 2,000,000 $ 3,875,000 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: Year Income Dividends 2023 2024 $480,000 960,000 $25,000 50,000 No asset impairments have occurred since the acquisition date. Individual financial statements for each company as of December 31, 2024, follow. Parentheses indicate credit balances. Dividends declared were paid in the same period. Incone Statement Sales Cost of goods sold Itens Depreciation expense Amortization expense Interest expense Equity earnings in Mathias. Net income Statement of Retained Earnings Allison $ (6,400,000) 4,500,000 875,000 430,000 55,000 (630,000) $ (1,170,000) Mathias $ (3,900,000) 2,500,000 277,000 103,000 60,000 $ (960,000)