Homework Help is Here – Start Your Trial Now!
Business
Accounting
Determine the annual excess fair over book value amortization. Prepare a worksheet to determine the consolidated values to be reported on Allison’s financial statements.

Determine the annual excess fair over book value amortization. Prepare a worksheet to determine the consolidated values to be reported on Allison’s financial statements.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
icon
Concept explainers
Topic Video
Question

  1. Determine the annual excess fair over book value amortization.

  2. Prepare a worksheet to determine the consolidated values to be reported on Allison’s financial statements.

Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $5,998,000 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 $2,030,000 including retained earnings of $1,530,000. At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary: Consideration transferred $5,998,000 2,030,000 $3,968,000 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) $ 848,000 2,560,000 (130,000) 3,278,000 Goodwill $ 690,000 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: Income Dividends $ 468,750 937,500 $ 25,000 50,000 2020 2021 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 $ (6,520,000) 4,584,000 905,000 445,000 67,000 (601,500) $ (1,120,500) Sales Cost of goods sold Depreciation expense Amortization expense $ (3,930,000) 2,519,500 295,000 112,000 66,000 Interest expense Equity earnings in Mathias Net income $ (937,500) Statement of Retained Earnings Retained earnings 1/1 Net income (above) $ (5,400,000) (1,120,500) 560,000 $ (5,960,500) $(1,973,750) (937,500) 50,000 Dividends declared Retained earnings 12/31 $ (2,861,250) Balance Sheet 152,000 240,000 815,000 84,000 980,000 1,760,000 6,657,250 3,760,000 110,000 2,155,000 Cash $ Accounts receivable Inventory Investment in Mathias Equipment (net) 2,073,000 Patents Unpatented technology Goodwill 1,480,000 446,000 $ 15,952,250 Total assets $ 4,760,000 Accounts payable Long-term debt $ (791,750) (1,000,000) (8,200,000) (5,960,500) 2$ (198,750) (1,200,000) (500,000) (2,861,250) $ (4,760,000) Common stock Retained earnings 12/31 Total liabilities and equity $ (15,952,250) 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.
Transcribed Image Text:Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $5,998,000 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 $2,030,000 including retained earnings of $1,530,000. At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary: Consideration transferred $5,998,000 2,030,000 $3,968,000 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) $ 848,000 2,560,000 (130,000) 3,278,000 Goodwill $ 690,000 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: Income Dividends $ 468,750 937,500 $ 25,000 50,000 2020 2021 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 $ (6,520,000) 4,584,000 905,000 445,000 67,000 (601,500) $ (1,120,500) Sales Cost of goods sold Depreciation expense Amortization expense $ (3,930,000) 2,519,500 295,000 112,000 66,000 Interest expense Equity earnings in Mathias Net income $ (937,500) Statement of Retained Earnings Retained earnings 1/1 Net income (above) $ (5,400,000) (1,120,500) 560,000 $ (5,960,500) $(1,973,750) (937,500) 50,000 Dividends declared Retained earnings 12/31 $ (2,861,250) Balance Sheet 152,000 240,000 815,000 84,000 980,000 1,760,000 6,657,250 3,760,000 110,000 2,155,000 Cash $ Accounts receivable Inventory Investment in Mathias Equipment (net) 2,073,000 Patents Unpatented technology Goodwill 1,480,000 446,000 $ 15,952,250 Total assets $ 4,760,000 Accounts payable Long-term debt $ (791,750) (1,000,000) (8,200,000) (5,960,500) 2$ (198,750) (1,200,000) (500,000) (2,861,250) $ (4,760,000) Common stock Retained earnings 12/31 Total liabilities and equity $ (15,952,250) 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.
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 A ALLISON CORPORATION AND CONSOLIDATED SUBSIDIARY Consolidation Worksheet For Year Ending December 31, 2021 Consolidation Entries Consolidated Totals Accounts Allison Mathias Debit Credit Income Statement Revenues $ (6,520,000) $ (3,930,000) Cost of goods sold 4,584,000 2,519,500 Depreciation expense 905,000 295,000 Amortization expense 445,000 112,000 Interest expense 67,000 66,000 Equity earnings in Mathias (601,500) Net income $ (1,120,500) $ (937,500) Statement of Retained Earnings Retained earnings 1/1 (5,400,000) (1,973,750) Net income (above) (1,120,500) (937,500) Dividends declared 560,000 50,000 Retained earnings 12/31 $ (5,960,500) $ (2,861,250) Balance Sheet Cash 84,000 $ 152,000 Accounts receivable 980,000 240,000 Inventories 1,760,000 815,000 Investment in Mathias 6,657,250 Equipment (net) 3,760,000 2,073,000 Patents 110,000 Unpatented technology 2,155,000 1,480,000 Goodwill 446,000 Total assets $ 15,952,250 2$ 4,760,000 Accounts payable (791,750) (198,750) Long-term debt (1,000,000) (1,200,000) Common stock (8,200,000) (500,000) Retained earnings 12/31 (5,960,500) (2,861,250) Total liabilities and equity $ (15,952,250) $ (4,760,000) $ 0 $ $ 17,429,000 < Required A Required B
Transcribed Image Text: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 A ALLISON CORPORATION AND CONSOLIDATED SUBSIDIARY Consolidation Worksheet For Year Ending December 31, 2021 Consolidation Entries Consolidated Totals Accounts Allison Mathias Debit Credit Income Statement Revenues $ (6,520,000) $ (3,930,000) Cost of goods sold 4,584,000 2,519,500 Depreciation expense 905,000 295,000 Amortization expense 445,000 112,000 Interest expense 67,000 66,000 Equity earnings in Mathias (601,500) Net income $ (1,120,500) $ (937,500) Statement of Retained Earnings Retained earnings 1/1 (5,400,000) (1,973,750) Net income (above) (1,120,500) (937,500) Dividends declared 560,000 50,000 Retained earnings 12/31 $ (5,960,500) $ (2,861,250) Balance Sheet Cash 84,000 $ 152,000 Accounts receivable 980,000 240,000 Inventories 1,760,000 815,000 Investment in Mathias 6,657,250 Equipment (net) 3,760,000 2,073,000 Patents 110,000 Unpatented technology 2,155,000 1,480,000 Goodwill 446,000 Total assets $ 15,952,250 2$ 4,760,000 Accounts payable (791,750) (198,750) Long-term debt (1,000,000) (1,200,000) Common stock (8,200,000) (500,000) Retained earnings 12/31 (5,960,500) (2,861,250) Total liabilities and equity $ (15,952,250) $ (4,760,000) $ 0 $ $ 17,429,000 < Required A Required B
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Financial Statements
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS