Reference no: EM132493250
Question - On January 1, 2017, Alison, Inc., paid $76,800 for a 40 percent interest in Holister Corporation's common stock. This investee had assets with a book value of $224,000 and liabilities of $104,000. A patent held by Holister having a $8,100 book value was actually worth $53,100. 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 $38,000 and declared and paid dividends of $13,000. In 2018, it had income of $61,700 and dividends of $18,000. During 2018, the fair value of Allison's investment in Holister had risen from $86,200 to $92,280.
Required -
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 fair-value accounting, what income from the investment in Holister should be reported for 2018?
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