Accounts Allison Consolidation Entries Mathias Debit Credit Income Statement Sales $ (6,840,000) $ (4,010,000) Cost of...

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Accounts Allison Consolidation Entries Mathias Debit Credit Income Statement Sales $ (6,840,000) $ (4,010,000) Cost of goods sold 4,808,000 2,571,500 Depreciation expense 985,000 343,000 Amortization expense 485,000 136,000 Interest expense 99,000 82,000 Equity earnings in Mathias (525,500) Net income $ (988,500) $ (877,500) Statement of Retained Earnings Retained earnings 1/1 (5,560,000) (2,023,750) Net income (above) (988,500) (877,500) Dividends declared 560,000 50,000 Retained earnings 12/31 $ (5,988,500) $ (2,851,250) Balance Sheet Cash Accounts receivable Inventories Investment in Mathias Equipment (net) Patents $ 108,000 $ 176,000 1,060,000 280,000 1,920,000 895,000 6,863,250 3,920,000 2,129,000 150,000 Unpatented technology Goodwill Total assets Accounts payable Long-term debt Common stock 2,235,000 1,560,000 502,000 $ 16,758,250 $ 5,040,000 (1,569,750) (488,750) (1,000,000) (1,200,000) (8,200,000) (500,000) Retained earnings 12/31 (5,988,500) (2,851,250) Total liabilities and equity $ (16,758,250) $ (5,040,000) $ 0 $ 0 Consolidated Totals $ 10,850,000 7,379,500 1,328,000 Allison Corporation acquired all of the outstanding voting stock of Mathias, Incorporated, on January 1, 2023, in exchange for $6,326,000 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 $2,110,000 including retained earnings of $1,610,000. At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary: Consideration transferred Mathias stockholders' equity Excess fair over book value $ 6,326,000 2,110,000 $ 4,216,000 to unpatented technology (8-year remaining life) to patents (10-year remaining life) to increase long-term debt (undervalued, 5-year remaining life) Goodwill $ 976,000 2,720,000 (210,000) 3,486,000 $ 730,000 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: Year 2023 2024 Dividends Income $ 438,750 $ 25,000 877,500 50,000 No asset impairments have occurred since the acquisition date. Individual financial statements for each company as of December 31, 2024, follow. Parentheses indicate credit balances. Dividends declared were paid in the same period. Income Statement Sales Cost of goods sold Items 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, 12/31 Balance Sheet Cash Accounts receivable Inventory Investment in Mathias Equipment (net) Patents Unpatented technology Goodwill Total assets Accounts payable Long-term debt Common stock Retained earnings, 12/31 Total liabilities and equity Allison $ (6,840,000) 4,808,000 985,000 485,000 99,000 (525,500) $ (988,500) $ (5,560,000) (988,500) 560,000 $ (5,988,500) $ 108,000 1,060,000 1,920,000 6,863,250 3,920,000 150,000 2,235,000 502,000 $ 16,758,250 $ (1,569,750) (1,000,000) (8,200,000) (5,988,500) $ (16,758,250) Mathias $ (4,010,000) 2,571,500 343,000 136,000 82,000 0 $ (877,500) $ (2,023,750) (877,500) 50,000 $ (2,851,250) $ 176,000 280,000 895,000 0 2,129,000 0 1,560,000 0 $ 5,040,000 $ (488,750) (1,200,000) (500,000) (2,851,250) $ (5,040,000) Accounts Allison Consolidation Entries Mathias Debit Credit Income Statement Sales $ (6,840,000) $ (4,010,000) Cost of goods sold 4,808,000 2,571,500 Depreciation expense 985,000 343,000 Amortization expense 485,000 136,000 Interest expense 99,000 82,000 Equity earnings in Mathias (525,500) Net income $ (988,500) $ (877,500) Statement of Retained Earnings Retained earnings 1/1 (5,560,000) (2,023,750) Net income (above) (988,500) (877,500) Dividends declared 560,000 50,000 Retained earnings 12/31 $ (5,988,500) $ (2,851,250) Balance Sheet Cash Accounts receivable Inventories Investment in Mathias Equipment (net) Patents $ 108,000 $ 176,000 1,060,000 280,000 1,920,000 895,000 6,863,250 3,920,000 2,129,000 150,000 Unpatented technology Goodwill Total assets Accounts payable Long-term debt Common stock 2,235,000 1,560,000 502,000 $ 16,758,250 $ 5,040,000 (1,569,750) (488,750) (1,000,000) (1,200,000) (8,200,000) (500,000) Retained earnings 12/31 (5,988,500) (2,851,250) Total liabilities and equity $ (16,758,250) $ (5,040,000) $ 0 $ 0 Consolidated Totals $ 10,850,000 7,379,500 1,328,000 Allison Corporation acquired all of the outstanding voting stock of Mathias, Incorporated, on January 1, 2023, in exchange for $6,326,000 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 $2,110,000 including retained earnings of $1,610,000. At the acquisition date, Allison prepared the following fair-value allocation schedule for its newly acquired subsidiary: Consideration transferred Mathias stockholders' equity Excess fair over book value $ 6,326,000 2,110,000 $ 4,216,000 to unpatented technology (8-year remaining life) to patents (10-year remaining life) to increase long-term debt (undervalued, 5-year remaining life) Goodwill $ 976,000 2,720,000 (210,000) 3,486,000 $ 730,000 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: Year 2023 2024 Dividends Income $ 438,750 $ 25,000 877,500 50,000 No asset impairments have occurred since the acquisition date. Individual financial statements for each company as of December 31, 2024, follow. Parentheses indicate credit balances. Dividends declared were paid in the same period. Income Statement Sales Cost of goods sold Items 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, 12/31 Balance Sheet Cash Accounts receivable Inventory Investment in Mathias Equipment (net) Patents Unpatented technology Goodwill Total assets Accounts payable Long-term debt Common stock Retained earnings, 12/31 Total liabilities and equity Allison $ (6,840,000) 4,808,000 985,000 485,000 99,000 (525,500) $ (988,500) $ (5,560,000) (988,500) 560,000 $ (5,988,500) $ 108,000 1,060,000 1,920,000 6,863,250 3,920,000 150,000 2,235,000 502,000 $ 16,758,250 $ (1,569,750) (1,000,000) (8,200,000) (5,988,500) $ (16,758,250) Mathias $ (4,010,000) 2,571,500 343,000 136,000 82,000 0 $ (877,500) $ (2,023,750) (877,500) 50,000 $ (2,851,250) $ 176,000 280,000 895,000 0 2,129,000 0 1,560,000 0 $ 5,040,000 $ (488,750) (1,200,000) (500,000) (2,851,250) $ (5,040,000)

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