Question
On January 1, 2017, Alison Inc., paid $77,000 for 40 percent interest in Holister Corporations common stock. This investee had assets with a book value
On January 1, 2017, Alison Inc., paid $77,000 for 40 percent interest in Holister Corporations common stock. This investee had assets with a book value of $223,000 and liabilities of $94,500. A patent held by Holister having a $10,800 book value was actually worth $52,800. 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 $48,700 and declared and paid dividends of $16,000. In 2018, it had income of $74,500 and dividends of $21,000. During 2018, the fair value of Alisons investment in Holister had risen from $90,580 to $100,180.
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 the fair-value accounting, what income from the investment in Holister should be reported for 2018?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started