Solved: Allison Corporation acquired all of the outstanding

voting stock of

Allison Corporation acquired all of the outstanding voting stock of Mathias, Inc., on January 1,
2017, in exchange for $5,875,000 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 $2,000,000 including retained earnings of $1,500,000.

At the acquisition date, Allison prepared the following fair value allocation schedule for its newly
acquired subsidiary:

Consideration transferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,875,000

Mathias stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000

Excess fair over book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,875,000

To unpatented technology (8-year remaining life) . . . . . . $ 800,000...........

To patents (10-year remaining life) . . . . . . . . . . . . . . . . . . 2,500,000 ...........

To increase long-term debt

(Undervalued, 5-year remaining life) . . . . . . . . . . . . . (100,000) ....3,200,000

Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 675,000

Post-acquisition, 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

2017 ............. $480,000 .................... $25,000

2018 .............. 960,000 ...................... 50,000

No asset impairments have occurred since the acquisition date. Individual financial statements
for each company as of December 31, 2018, appear below. Parentheses indicate credit
balances. Dividends declared were paid in the same period.

Required:

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 a. Show how Allison determined its December 31, 2018, Investment in Mathias balance.

b. 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

ANSWER
https://solvedquest.com/allison-corporation-acquired-all-of-the-outstanding-voting-stock-of/

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