On January 1, 2017, Alison, Inc., paid $62,500 for a 40 percent interest in Holister Corporationâs common stock. This investee had assets with a book value of $220,500 and liabilities of $87,000. A patent held by Holister having a $8,100 book value was actually worth $20,100. This patent had a six-year remaining life. Any further excess cost associated with this acquisition was attributed to goodwill. During 2017, Holister earned income of $42,000 and declared and paid dividends of $14,000. In 2018, it had income of $57,000 and dividends of $19,000. During 2018, the fair value of Allisonâs investment in Holister had risen from $74,100 to $81,000.
a. Assuming Alison uses the equity method, what balance should appear in the Investment in Holister account as of December 31, 2018?
b. Assuming Alison uses fair-value accounting, what income from the investment in Holister should be reported for 2018?
On January 1, 2017, Alison, Inc., paid $62,500 for a 40 percent interest in Holister Corporationâs common stock. This investee had assets with a book value of $220,500 and liabilities of $87,000. A patent held by Holister having a $8,100 book value was actually worth $20,100. This patent had a six-year remaining life. Any further excess cost associated with this acquisition was attributed to goodwill. During 2017, Holister earned income of $42,000 and declared and paid dividends of $14,000. In 2018, it had income of $57,000 and dividends of $19,000. During 2018, the fair value of Allisonâs investment in Holister had risen from $74,100 to $81,000.
a. Assuming Alison uses the equity method, what balance should appear in the Investment in Holister account as of December 31, 2018?
b. Assuming Alison uses fair-value accounting, what income from the investment in Holister should be reported for 2018?
Related questions
On January 1, 2014, Alison, Inc., paid $72,000 for a 40 percentinterest in Holister Corporationâs common stock. This investee hadassets with a book value of $260,500 and liabilities of $115,500. Apatent held by Holister having a $10,200 book value was actuallyworth $23,700. This patent had a six-year remaining life. Anyfurther excess cost associated with this acquisition was attributedto goodwill. During 2014, Holister earned income of $39,000 anddeclared and paid dividends of $13,000. In 2015, it had income of$61,500 and dividends of $18,000. During 2015, the fair value ofAllisonâs investment in Holister had risen from $84,500 to$92,700.
| Assuming Alison uses the equity method, what balance shouldappear in the Investment in Holister account as of December 31,2015?
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