Allison Corporation acquired all of the outstanding voting stockof Mathias, Inc., on January 1, 2020, in exchange for $6,203,000 incash. Allison intends to maintain Mathias as a wholly ownedsubsidiary. Both companies have December 31 fiscal year-ends. Atthe acquisition date, Mathias’s stockholders’ equity was $2,080,000including retained earnings of $1,580,000.
At the acquisition date, Allison prepared the followingfair-value allocation schedule for its newly acquiredsubsidiary:
Postacquisition, Allison employs the equity method to accountfor its investment in Mathias. During the two years following thebusiness combination, Mathias reports the following income anddividends:
No asset impairments have occurred since the acquisitiondate.
Individual financial statements for each
company as of December31, 2021, follow. Parentheses indicate credit balances. Dividendsdeclared were paid in the same period.
Required:
A. Determine the annual excess fair over book valueamortization.
B. Prepare a worksheet to determine the consolidated values tobe 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 1 (45.33 KiB) Viewed 10 times
Accounts Income
Statement Revenues 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 12/3 Balance Sheet Cash Accounts receivable Inventories Investment in Mathias Equipment (net) Patents Unpatented technology Goodwill Total assets ALLISON CORPORATION AND CONSOLIDATED SUBSIDIARY Consolidation Worksheet For Year Ending December 31, 2021 Accounts payable Long-term debt Allison $ (6,720,000) $ (3,980,000) 4,724,000 2,552,000 325,000 127,000 76,000 955,000 470,000 87,000 (554,000) $ (1,038,000) $ (900,000) $ Mathias (5,500,000) (1,038,000) 560,000 $ (5,978,000) $ (2,855,000) 99,000 $ 1,030,000 1,860,000 6,786,000 3,860,000 (2,005,000) (900,000) 50,000 167,000 265,000 865,000 2,108,000 135,000 2,205,000 481,000 $ 16,456,000 $ 4,935,000 1,530,000 (1,278,000) (380,000) (1,000,000) (1,200,000) Consolidation Entries Credit Debit Consolidated Totals