Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $6,162,000 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 $2,070,000 including retained earnings of $1,570,000. At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary: Consideration transferred $ 6,162,000 Mathias stockholders' equity 2,070,000 Excess fair over book value $ 4,092,000 to unpatented technology (8-year remaining life) $ 912,000 to patents (10-year remaining life) 2,640,000 to increase long-term debt (undervalued, 5-year remaining life) (170,000 ) 3,382,000 Goodwill $ 710,000 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 Dividends2020 $ 453,750 $ 25,0002021 907,500 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 MathiasIncome Statement Sales $ (6,680,000 ) $ (3,970,000 )Cost of goods sold 4,696,000 2,545,500 Depreciation expense 945,000 319,000 Amortization expense 465,000 124,000 Interest expense 83,000 74,000 Equity earnings in Mathias (563,500 ) 0 Net income $ (1,054,500 ) $ (907,500 )Statement of Retained Earnings Retained earnings 1/1 $ (5,480,000 ) $ (1,998,750 )Net income (above) (1,054,500 ) (907,500 )Dividends declared 560,000 50,000 Retained earnings 12/31 $ (5,974,500 ) $ (2,856,250 )Balance Sheet Cash $ 96,000 $ 164,000 Accounts receivable 1,020,000 260,000 Inventory 1,840,000 855,000 Investment in Mathias 6,760,250 0 Equipment (net) 3,840,000 2,101,000 Patents 130,000 0 Unpatented technology 2,195,000 1,520,000 Goodwill 474,000 0 Total assets $ 16,355,250 $ 4,900,000 Accounts payable $ (1,180,750 ) $ (343,750 )Long-term debt (1,000,000 ) (1,200,000 )Common stock (8,200,000 ) (500,000 )Retained earnings 12/31 (5,974,500 ) (2,856,250 )Total liabilities and equity $ (16,355,250 ) $ (4,900,000 ) Required: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. 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 BDetermine the annual excess fair over book value amortization.Annual excess fair over book value amortization $ 344,000 Complete this question by entering your answers in the tabs below.Required A Required BPrepare a worksheet to determine the consolidated values to be reported on Allison's financial statements. (For accounts wheremultiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit columnof the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of theworksheet. Input all amounts as positive values.)AccountsIncome StatementRevenuesCost of goods soldDepreciation expenseAmortization expenseInterest expenseEquity earnings in MathiasNet incomestatement of Retained EarningeRetained earnings 1/1Net income (above)Dividends declaredRetained earnings 12/31Balance SheetCashAccounts receivableInventoriesInvestment in MathiasEquipment (net)PatentsUnpatented technologyGoodwillTotal assetsALLISON CORPORATION AND CONSOLIDATED SUBSIDIARYConsolidation WorksheetFor Year Ending December 31, 2021Accounts payableLong-term debtCommon stockRetained earnings 12/31Total liabilities and equityAllisonMathias$ (6,680,000) $ (3,970,000)4,696,0002,545,500945,000319,000465,000124,00083,00074,000(563,500)$ (1,054,500) S (907,500)(5,480,000)(1,998,750)(1,054,500)(907,500)560,00050,000$ (5,974,500) S (2,856,250)$ 96,000 S1,020,0001,840,0006,760,2503,840,000130,0002,195,000164,000260,000855,0002,101,0001,520,000474,000$ 16,355,250 S 4,900,000(1,180,750)(343,750)(1,000,000) (1,200,000)(8,200,000)(500,000)(5,974,500) (2,856,250)$(16,355,250) S (4,900,000) $Consolidation EntriesCreditDebitConsolidatedTotale$(10,650,000)7,241,5001,264,0000 $ 18,001,000Show less A

Question

Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $6,162,000 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 $2,070,000 including retained earnings of $1,570,000. At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary:  	 	 	 	 	 	 	 Consideration transferred	 	 	 	 	$	6,162,000	 Mathias stockholders' equity	 	 	 	 	 	2,070,000	 Excess fair over book value	 	 	 	 	$	4,092,000	 to unpatented technology (8-year remaining life)	$	912,000	 	 	 	 	 to patents (10-year remaining life)	 	2,640,000	 	 	 	 	 to increase long-term debt (undervalued, 5-year remaining life)	 	(170,000	)	 	 	3,382,000	 Goodwill	 	 	 	 	$	710,000	  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	Dividends2020	$	453,750	$	25,0002021	 	907,500	 	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	 	MathiasIncome Statement	 	 	 	 	 	 	 Sales	$	(6,680,000	)	 	$	(3,970,000	)Cost of goods sold	 	4,696,000	 	 	 	2,545,500	 Depreciation expense	 	945,000	 	 	 	319,000	 Amortization expense	 	465,000	 	 	 	124,000	 Interest expense	 	83,000	 	 	 	74,000	 Equity earnings in Mathias	 	(563,500	)	 	 	0	 Net income	$	(1,054,500	)	 	$	(907,500	)Statement of Retained Earnings	 	 	 	 	 	 	 Retained earnings 1/1	$	(5,480,000	)	 	$	(1,998,750	)Net income (above)	 	(1,054,500	)	 	 	(907,500	)Dividends declared	 	560,000	 	 	 	50,000	 Retained earnings 12/31	$	(5,974,500	)	 	$	(2,856,250	)Balance Sheet	 	 	 	 	 	 	 Cash	$	96,000	 	 	$	164,000	 Accounts receivable	 	1,020,000	 	 	 	260,000	 Inventory	 	1,840,000	 	 	 	855,000	 Investment in Mathias	 	6,760,250	 	 	 	0	 Equipment (net)	 	3,840,000	 	 	 	2,101,000	 Patents	 	130,000	 	 	 	0	 Unpatented technology	 	2,195,000	 	 	 	1,520,000	 Goodwill	 	474,000	 	 	 	0	 Total assets	$	16,355,250	 	 	$	4,900,000	 Accounts payable	$	(1,180,750	)	 	$	(343,750	)Long-term debt	 	(1,000,000	)	 	 	(1,200,000	)Common stock	 	(8,200,000	)	 	 	(500,000	)Retained earnings 12/31	 	(5,974,500	)	 	 	(2,856,250	)Total liabilities and equity	$	(16,355,250	)	 	$	(4,900,000	) Required: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. 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 BDetermine the annual excess fair over book value amortization.Annual excess fair over book value amortization $ 344,000 Complete this question by entering your answers in the tabs below.Required A Required BPrepare a worksheet to determine the consolidated values to be reported on Allison's financial statements. (For accounts wheremultiple consolidation entries are required, combine all debit entries into one amount and enter this amount in the debit columnof the worksheet. Similarly, combine all credit entries into one amount and enter this amount in the credit column of theworksheet. Input all amounts as positive values.)AccountsIncome StatementRevenuesCost of goods soldDepreciation expenseAmortization expenseInterest expenseEquity earnings in MathiasNet incomestatement of Retained EarningeRetained earnings 1/1Net income (above)Dividends declaredRetained earnings 12/31Balance SheetCashAccounts receivableInventoriesInvestment in MathiasEquipment (net)PatentsUnpatented technologyGoodwillTotal assetsALLISON CORPORATION AND CONSOLIDATED SUBSIDIARYConsolidation WorksheetFor Year Ending December 31, 2021Accounts payableLong-term debtCommon stockRetained earnings 12/31Total liabilities and equityAllisonMathias$ (6,680,000) $ (3,970,000)4,696,0002,545,500945,000319,000465,000124,00083,00074,000(563,500)$ (1,054,500) S (907,500)(5,480,000)(1,998,750)(1,054,500)(907,500)560,00050,000$ (5,974,500) S (2,856,250)$ 96,000 S1,020,0001,840,0006,760,2503,840,000130,0002,195,000164,000260,000855,0002,101,0001,520,000474,000$ 16,355,250 S 4,900,000(1,180,750)(343,750)(1,000,000) (1,200,000)(8,200,000)(500,000)(5,974,500) (2,856,250)$(16,355,250) S (4,900,000) $Consolidation EntriesCreditDebitConsolidatedTotale$(10,650,000)7,241,5001,264,0000 $ 18,001,000Show less A

Accepted Answer

The objective of the question is to determine the annual excess fair over book value amortization…