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On January 1, 2017, Alison, Inc., paid $91,300 for a 40 percent interest in Holister Corporation’s...

On January 1, 2017, Alison, Inc., paid $91,300 for a 40 percent interest in Holister Corporation’s common stock. This investee had assets with a book value of $243,500 and liabilities of $87,500. A patent held by Holister having a $6,000 book value was actually worth $60,000. 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 $35,200 and declared and paid dividends of $12,000. In 2018, it had income of $54,200 and dividends of $17,000. During 2018, the fair value of Allison’s investment in Holister had risen from $98,780 to $102,860.

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?

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ekkarill92 answered 1 year ago
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