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:
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?

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Mathlas Income Statement Sales Cost of goods sold Depreciation expense Amortization expense Interest expense Equity earnings in Mathias Allison (6,400,000) 4,500,000 875,000 430,000 55,000 (630,000) (3,900,000) 2,500,000 277,000 103,000 60,000 0- Net income 60 Statement of Retained Earnings (5,340,000) (1,170,000) 560,000 Retained earnings 1/1 Net income (above) Dividends declared Retained earnings 12/31 Balance Sheet Cash Accounts receivable Inventories Investment in Mathias Equipment (net) Patents Unpatented technology Goodwil (1,955,000) (960,000) 50,000 75,000 950,000 1,700,000 6,580,000 3,700,000 95,000 2,125,000 425,000 15,650,000 143,000 225,000 785,000 2,052,000 1,450,000 4,655,000 Total assets Accounts payable Long-term debt Common stock Retained earnings 12/31 (500,000) (1,000,000) (8,200,000) 5,950,000) 15,650,000 (90,000) (1,200,000) (500,000) (2.865,000) (4.655,000 (5 Total liabilities and equity