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Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $6,305,500 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 $2,105,000 including retained earnings of $1,605,000. At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary: $6,305,500 2,105,000 $4,200, 500 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 $ 968,000 2,710, ese (285,000) 3,473,000 $ 727,500 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 $ 440,625 881,250 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 $ (6,820, 000) 4,794,000 980, eee 482,500 $(4,805,880) 2,568,250 340,000 134,500 81,000 97, eee (530, 250) (996, 750) $ $ (881,250) $ (5,550,000) (996,750) 560,000 $ (5,986,750) $(2,020, 625) (881,250) 50,000 $(2,851,875) 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 174,500 277,500 890,000 2,125,500 1,555,000 $ 106,500 1,655, eee 1,910,000 6,850, 375 3,910,000 147,500 2,230,000 498,500 $ 16,707,875 $ (1,521, 125) (1,000,000) (8,200,000) (5,986,750) $(16,707,875) $ 5,22,500 $ (470, 625) (1,200,000) (500,000) (2,851,875) $(5,022,500) Required: a. Determine the amortization (AMORT) of 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. 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 Consolidation Worksheet For Year Ending December 31, 2021 Consolidation Entries Accounts Allison Mathias Debit Credit Consolidated Totals Income Statement Revenues Cost of goods sold Depreciation expense Amortization expense Interest expense Equity earnings in Mathias Net income $ (6,820,000) $ (4,005,000) 4,794,000 2,568,250 980,000 340,000 482,500 134,500 97,000 81,000 (530,250) (996,750) S S (881,250) Statement of Retained Earnings Retained earnings 1/1 Net income (above) Dividends declared Retained earnings 12/31 (5,550,000) (996,750) 560,000 S (5,986,750) (2,020,625) (881,250) 50,000 $ (2,851,875) Balance Sheet Cash Accounts receivable 174,500 277,500 890,000 $ 106,500 $ 1,055,000 1,910,000 6,850,375 3,910,000 147,500 2,230,000 498,500 $ 16,707,875 $ Inventories Investment in Mathias Equipment (net) Patents Unpatented technology Goodwill Total assets 2,125,500 1,555,000 5,022,500 Accounts payable Long-term debt Common stock Retained earnings 12/31 Total liabilities and equity (1,521,125) (470,625) (1,000,000) (1,200,000) (8,200,000) (500,000) (5,986,750) (2.851,875) $(16,707,875) $ (5,022,500) $ 0 $ 0 $ 18,501,500
