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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:
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:
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.
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