On January 1, 2014, Alison, Inc., paid $77,000 for a 40 percent interest in Holister Corporation's 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 2014, Holister earned income of $48,700 and declared and paid dividends of $16,000. In 2015, it had income of $74,500 and dividends of $21,000. During 2015, the fair value of Allison's 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, 2015? Investment in Holister b. Assuming Alison uses fair-value accounting, what income from the investment in Holister should be reported for 2015? Investment income
On January 1, 2014, Alison, Inc., paid $77,000 for a 40 percent interest in Holister Corporation's 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 2014, Holister earned income of $48,700 and declared and paid dividends of $16,000. In 2015, it had income of $74,500 and dividends of $21,000. During 2015, the fair value of Allison's 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, 2015? Investment in Holister b. Assuming Alison uses fair-value accounting, what income from the investment in Holister should be reported for 2015? Investment income
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, 2014, Alison, Inc., paid $77,000 for a 40 percent interest in Holister Corporation's 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 2014, Holister
earned income of $48,700 and declared and paid dividends of $16,000. In 2015, it had income of $74,500
and dividends of $21,000. During 2015, the fair value of Allison's 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, 2015?
Investment in Holister
b. Assuming Alison uses fair-value accounting, what income from the investment in Holister should be
reported for 2015?
Investment income
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