Reference no: EM13745877
On January 1, 2014, 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 2014, Holister earned income of $32,500 and declared and paid dividends of $11,000. In 2015, it had income of $71,500 and dividends of $16,000. During 2015, the fair value of Allison’s investment in Holister had risen from $79,200 to $89,900.
Assuming Alison uses the equity method, what balance should appear in the Investment in Holister account as of December 31, 2015?
Assuming Alison uses fair-value accounting, what income from the investment in Holister should be reported for 2015?
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