On January 1, 2020, Alison, Inc., paid $83,800 for a 40 percent interest in Holister Corporation’s common stock. This investee had assets with a book value of $290,500 and liabilities of $117,000. A patent held by Holister having a $13,600 book value was actually worth $31,600. This patent had a six-year remaining life. Any further excess cost associated with this acquisition was attributed to goodwill. During 2020, Holister earned income of $40,700 and declared and paid dividends of $14,000. In 2021, it had income of $70,000 and dividends of $19,000. During 2021, the fair value of Allison’s investment in Holister had risen from $95,380 to $106,180. Assuming Alison uses the equity method, what balance should appear in the Investment in Holister account as of December 31, 2021? Assuming Alison uses fair-value accounting, what income from the investment in Holister should be reported for 2021?
On January 1, 2020, Alison, Inc., paid $83,800 for a 40 percent interest in Holister Corporation’s common stock. This investee had assets with a book value of $290,500 and liabilities of $117,000. A patent held by Holister having a $13,600 book value was actually worth $31,600. This patent had a six-year remaining life. Any further excess cost associated with this acquisition was attributed to
Assuming Alison uses the equity method, what balance should appear in the Investment in Holister account as of December 31, 2021?
Assuming Alison uses fair-value accounting, what income from the investment in Holister should be reported for 2021?
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