On January 1 2017 Alison Inc paid 86900 for a 40 percent int

On January 1, 2017, Alison, Inc., paid $86,900 for a 40 percent interest in Holister Corporation’s common stock. This investee had assets with a book value of $229,500 and liabilities of $79,500. A patent held by Holister having a $11,500 book value was actually worth $50,500. 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 $53,500 and declared and paid dividends of $18,000. In 2018, it had income of $51,000 and dividends of $23,000. During 2018, the fair value of Allison’s investment in Holister had risen from $99,600 to $102,400.

a. Assuming Alison uses the equity method, what balance should appear in the Investment in Holister account as of December 31, 2018? (Investment in holister?)

b. Assuming Alison uses fair-value accounting, what income from the investment in Holister should be reported for 2018?

(Investment income?)

For 2018 the income will be share of the dividends paid by Holister, i.e., 40% of $23,000 =$9,200.

The increase in the fair value of the investment will be acounted under unrealized Gain /loss on equity investment.

a. Balance in the Investment in Holister account as at Dec.31, 2018	105670

Equity method

Date	Details	Amount
Jan.1, 2017	Investment made for 40% stake	86900
Dec.31, 2017	Amortization of excess fair value *	-3315
Dec.31,2017	Share of income (40% of 53,500)	21400
Dec.31, 2017	Share of dividend paid (40% of 18,000)	-7200
Dec.31, 2017	Investment account balance	97785

Jan.1, 2018	Balance of investment account	97785
Dec.31, 2018	Amortization of excess fair value *	-3315
Dec.31,2018	Share of income (40% of 51,000)	20400
Dec.31, 2018	Share of dividend paid (40% of 23,000)	-9200
Dec.31, 2018	Investment account balance	105670

	Working:
	Assets	229500
	Liabilities	79500
		150000
	40% of this net assets	60000
	Price paid	86900
	Excess paid	26900

	Fair value of patent	50500
	Book value of patent	11500
	Excess of faoir value for patent	39000
	40% of this excess value	15600

	Amount paid for goodwill(26,900 - 15,600)	14300

	Patent to be amortized over 6 years
	Goodwill is to be amortized say, over 20 years.

	Annual amortization of patent (15,600/6)	2600
	Annual amortization of goodwill (14,300/20)	715
	Total amortization *	3315

On January 1, 2017, Alison, Inc., paid $86,900 for a 40 percent interest in Holister Corporation’s common stock. This investee had assets with a book value of $

On January 1 2017 Alison Inc paid 86900 for a 40 percent int

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