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Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2017, in exchange for $6,018
Post-acquisition, Allison employs the equity method to account for its investment in Mathias. During the two years following
Individual financial statements for each company as of December 31, 2018, appear below. Parentheses indicate credit balances.
560,000 $ (5,962,250) 50,000 $(2,860, 625) $ 153,500 242,500 820,000 Dividends declared Retained earnings 12/31 Balance Sheet
Required: a. Determine Allisons December 31, 2018, Investment in Mathias balance. b. Prepare a worksheet to determine the co
ALLISON CORPORATION AND CONSOLIDATED SUBSIDIARY Consolidation Worksheet For Year Ending December 31, 2018 Consolidation Entri
Net income $ (1,112,250) $ (933,750) Statement of Retained Earnings Retained earnings 1/1 Net income (above) Dividends declar
$ 153,500 242,500 820,000 alance Sheet ash \ccounts receivable nventories nvestment in Mathias Equipment (net) Patents Unpate
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Answer #1

Part A

Investment in Mathias:

Consideration transferred at 1/1/17

6018500

Allison’s equity in Mathias earnings (net of amortization):

2017 ($466875 – $337,000)

129875

2018 ($933750 – $337,000)

596750

Post-acquisition earnings net of amortization

726625

Mathias dividends since acquisition

(75000)

Investment balance at 12/31/18

$6670125

Excess acquisition-date fair over book value amortizations:

Unpatented technology ($856,000 ÷ 8 years)

107000

Patents ($2,570,000 ÷ 10 years)

257000

Long-term debt ($135,000 ÷ 5 years)

(27000)

Annual excess fair over book value amortization

$337000

Part B

ALLISON CORPORATION AND CONSOLIDATED SUBSIDIARY

Consolidation Worksheet

For Year Ending December 31, 2018

Consolidation Entries

Allison

Mathias

Debit

Credit

consolidated

Income Statement

Revenues

(6540000)

(3935000)

(10475000)

Cost of goods sold

4598000

2522750

7120750

Depreciation expenses

910000

298000

1208000

Amortization expenses

447500

113500

364000

925000

Interest expense

69000

67000

27000

109000

Equity earnings in Mathias

(596750)

0

596750

0

Net income

(1112250)

(933750)

(1112250)

Statement of Retained Earnings

Retained earnings 1/1

(5410000)

(1976875)

1976875

(5410000)

Net income (above)

(1112250)

(933750)

(1112250)

Dividends declared

560000

50000

50000

560000

Retained earnings 12/31

(5962250)

(2860625)

(5962250)

Balance Sheet

Cash

85500

153500

239000

Accounts receivable

985000

242500

1227500

Inventory

1770000

820000

2590000

Investment in Mathias

6670125

50000

6720125

0

Equipment (net)

3770000

2076500

5846500

Patents

112500

0

2313000

257000

2168500

Unpatented technology

2160000

1485000

749000

107000

4287000

Goodwill

449500

0

692500

1142000

Total assets

16002625

4777500

17500500

Accounts payable

(840375)

(216875)

(1057250)

Long-term debt

(1000000)

(1200000)

27000

108000

(2281000)

Common stock

(8200000)

(500000)

500000

(8200000)

Retained earnings 12/31

(5962250)

(2860625)

(5962250)

Total liabilities and equity

(16002625)

(4777500)

7269125

7269125

(17071500)
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