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On January 1, 2017, Alison, Inc., paid $83,600 for a 40 percent interest in Holister Corporation’s...

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Accounting

On January 1, 2017, Alison, Inc., paid $83,600 for a 40 percentinterest in Holister Corporation’s common stock. This investee hadassets with a book value of $279,500 and liabilities of $118,500. Apatent held by Holister having a $6,800 book value was actuallyworth $42,800. This patent had a six-year remaining life. Anyfurther excess cost associated with this acquisition was attributedto goodwill. During 2017, Holister earned income of $33,500 anddeclared and paid dividends of $11,000. In 2018, it had income of$68,000 and dividends of $16,000. During 2018, the fair value ofAllison’s investment in Holister had risen from $92,900 to$103,200.

a. Assuming Alison uses the equity method, whatbalance should appear in the Investment in Holister account as ofDecember 31, 2018?

b. Assuming Alison uses fair-value accounting,what income from the investment in Holister should be reported for2018?

Answer & Explanation Solved by verified expert
3.7 Ratings (447 Votes)
a Using Equity Method As Per International Accounting Standard 28 Investment in Associates is recognized using equity method which is as follows Calculation of Fair Value of Net Assets of Investee 279500118500 6800book value 42800Patent Worth 197000    See Answer
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