Question

On January 1, 2017, Alison, Inc., paid $91,300 for a 40 percent interest in Holister Corporation’s common stock. This investee had assets with a book value of $243,500 and liabilities of $87,500. A patent held by Holister having a $6,000 book value was actually worth $60,000. 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 $35,200 and declared and paid dividends of $12,000. In 2018, it had income of $54,200 and dividends of $17,000. During 2018, the fair value of Allison’s investment in Holister had risen from $98,780 to $102,860. 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?

No Date General Journal Debit Credit 01/01/2017 Investment in Kinman Co 228,600 Cash 228,600 2 12/31/2017 Dividends receivable 9,200 Investment in Kinman Co 9,200 12/31/2017 Cash 9,200 Dividends receivable 9,200 23,760 9,280 4 12/31/2017 Equity in Kinman income Other comprehensive loss of Kinman Investment in Kinman Co 33,040

Answer 1

classmAte Date hvessment For the seaz can be calhiel at ear can be Calalahed asoe Amt $ 91,300 Acquisition Pri Bool )alue:Asseh-Liabilit○156,000メ40リー $ 62,400 Excess paymenb value of ptent in excess of book value21,600 28g00 с $60,000-600)X401) $1300 Arnor 1ation Patert (t2960$21.6006 $3600 G00d51 Annua amostization Acquisition cost Ba sic equity acuol go C$35,200 4u o $3 600 $91,300 - 2011(41 2000 x uor ) A moti2ation- 2o17 above nvestment in Holistes 12131 2017 -$3 600 $96,9 80 - 9018$ Su,2002, 630 Dividends-2012 ($ 다000一ㄧ x407) l-S6800 Basic equit accrual -52600 nvestment in Holistes 121311 2018 $ 1082 6O b) $6300 ncrase in falr value C$102,860-398,0 4020 Dividend Income Csitoo0 O Investme rt Income uDder faix blue $ 10880 Acounting-9o&