On January 1, 2020. Alison, Inc., paid $69,500 for a 40 percent interest in Holister Corporation's common stock. This investee hadassets with a book value of $219,500 and liabilities of $95,500. A patent held by Holister having a $12,000 book value was actuallyworth $31,500. This patent had a six-year remaining life. Any further excess cost associated with this acquisition was attributed togoodwill. During 2020, Holister earned income of $32,500 and declared and paid dividends of $11,000. In 2021, it had income of$71,500 and dividends of $16,000. During 2021, the fair value of Allison's investment in Holister had risen from $79,200 to $89,900.a. Assuming Alison uses the equity method, what balance should appear in the Investment in Holister account as of December 31,2021?b. Assuming Alison uses fair-value accounting, what income from the investment in Holister should be reported for 2021?a.Investment in Holisterb.Investment income

Investment in any other company can be reported by using Equity method or fair value method.

o. Assuming Alison uses the equity method, what balance should appear in the Investment in Holister account as of December 31, 2021? b. Assuming Alison uses fair-value accounting. what income from the investment in Holister should be reported for 2021?

o. Assuming Alison uses the equity method, what balance should appear in the Investment in Holister account as of December 31, 2021? b. Assuming Alison uses fair-value accounting. what income from the investment in Holister should be reported for 2021?

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 8MC

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

On January 1, 2020. Alison, Inc., paid $69,500 for a 40 percent interest in Holister Corporation's common stock. This investee had
assets with a book value of $219,500 and liabilities of $95,500. A patent held by Holister having a $12,000 book value was actually
worth $31,500. 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 $32,500 and declared and paid dividends of $11,000. In 2021, it had income of
$71,500 and dividends of $16,000. During 2021, the fair value of Allison's investment in Holister had risen from $79,200 to $89,900.
a. Assuming Alison uses the equity method, what balance should appear in the Investment in Holister account as of December 31,
2021?
b. Assuming Alison uses fair-value accounting, what income from the investment in Holister should be reported for 2021?
a.
Investment in Holister
b.
Investment income

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