Question

Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1, 2020, in exchange for $6,387,500 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 $2,125,000 including retained earnings of $1,625,000. At the acquisition date, Allison prepared the following fair value allocation schedule for its newly acquired subsidiary: $6,387,500 2,125,000 $4,262,500 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 $1,000,000 2,750,000 (225,000) 3,525,000 $ 737,500 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 $ 433,125 866,250 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. Mathias Income Statement Sales Cost of goods sold Depreciation expense mortization expense Interest expense Equity earnings in Mathias Net income Statement of Retained Earnings Allison $ (6,900,000) 4,850,000 1,000,000 492,500 105,000 (511,250) (963,750) $(4,025,000) 2,581,250 352.000 140,500 85,000 0 5 (866,250) EERA ANTES

Answer 1

PAGE NO. 737500 only to balance sheet & the 4 fair value in excess of look value, 4262500 that includes nimeopatented te'hnology [ 1000ooo la patent 27500 oot long term debt (225000) 35250 00 goodwill here the investiment in Mathias is valued as fare quity methard made is shown in is dis clausee purpose (2) Consolidated profit I loss since it valued an equity basis, on pal includes her transation itself a share in mathias will includo. 2 K PLL ALL para el Allison las per ques gina 45.8596 (+ mathias share [433125 dividend paid [uscco + (75000) 752017 +266250 1299.375 by mathias clasing salesce 1676875 so 69.90625 $ 0 since it acquired 1004_shor mathajos - inital investiment Share în peept (ef moedebell 433185+ 866050 f dividend of (0020 Zoom 25000 +75000) REDMI NOTE 8 AI QUAD CAMERA 7615ooo Always ahead.

DATE: PAGE NO. tere in dues quen investment al 63 87500 - brut quz axoling, , my assumption it should 639062" inuestroment in mathics de 6390625 To bank 6390625 1299375 investment in mathias de 1299375 TO PLL ALL Cuecend share in profit) Dividend for L) ale 75000 To investiment in pathias Altos Balanil Sheet Accounts payalde 1715625 cash 1/2500 Long term loan 1000000 inwentary 1950000 Cannon stock 82000 odtwent recitalle 1095000 Retained cleaning 167068 sinustment in mathias 7685000 opening 559 oba Equipment 3450000 t/cy-pight 452500 fatent 157500 to share in 1299375 2250000 mathas 512500.- direland ly 65000) mathias dividend paid Shooo) unfiteated Technology 17.622500 17602500 REDMI NOTE 8 09 AI QUAD CAMERA

PLEASE LIKE THE ANSWER IF YOU FIND IT HELPFUL OR YOU CAN COMMENT IF YOU NEED CLARITY / EXPLANATION ON ANY POINT.