Question

On January 1, 2020, Alison, Inc., paid $73,500 for a 40 percent interest in Holister Corporation’s...

On January 1, 2020, Alison, Inc., paid $73,500 for a 40 percent interest in Holister Corporation’s common stock. This investee had assets with a book value of $234,500 and liabilities of $101,500. A patent held by Holister having a $5,500 book value was actually worth $37,000. This patent had a six-year remaining life. Any further excess cost associated with this acquisition was attributed to goodwill. During 2020, Holister earned income of $49,000 and declared and paid dividends of $16,000. In 2021, it had income of $73,500 and dividends of $21,000. During 2021, the fair value of Allison’s investment in Holister had risen from $86,400 to $97,500.

  1. Assuming Alison uses the equity method, what balance should appear in the Investment in Holister account as of December 31, 2021?

  2. Assuming Alison uses fair-value accounting, what income from the investment in Holister should be reported for 2021?

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
On January 1, 2018, Roland, Inc., paid $200,000 for a 40% interest in Holt Corp.’s common...
On January 1, 2018, Roland, Inc., paid $200,000 for a 40% interest in Holt Corp.’s common stock. This investee had assets with a book value of $250,000 and liabilities of $10,000. A patent held by Holt having a $5,000 book value was actually worth $25,000. A building held by Holt had a book value of $70,000 and a fair value of $120,000. The patent had a remaining useful life of 5 years while the building had a 10 year remaining...
C1.       On January 1, 2020, Skyline Co. paid $200,000 for a 40% interest in Allen Industries....
C1.       On January 1, 2020, Skyline Co. paid $200,000 for a 40% interest in Allen Industries. Allen Industries’ stockholders’ equity amounted to $300,000 on that date. The excess of purchase price over book values was due to an unrecorded patent valued at $200,000 with a 5-year life. During 2020, Allen Industries reported income of $80,000 and paid dividends of $18,000. During 2021, it reported income of $90,000 and dividends of $48,000. Assume that Skyline Co. has significant influence over the...
In January 2020, Domingo, Inc., acquired 20 percent of the outstanding common stock of Martes, Inc.,...
In January 2020, Domingo, Inc., acquired 20 percent of the outstanding common stock of Martes, Inc., for $877,000. This investment gave Domingo the ability to exercise significant influence over Martes, whose balance sheet on that date showed total assets of $4,594,000 with liabilities of $984,000. Any excess of cost over book value of the investment was attributed to a patent having a remaining useful life of 10 years. In 2020, Martes reported net income of $235,000. In 2021, Martes reported...
On January 1, 2017, Dawson, Incorporated, paid $100,000 for a 30% interest in Sacco Corporation. This...
On January 1, 2017, Dawson, Incorporated, paid $100,000 for a 30% interest in Sacco Corporation. This investee had assets with a book value of $550,000 and liabilities of $300,000. A patent held by Sacco having a book value of $10,000 was actually worth $40,000 with a six-year remaining life. Any goodwill associated with this acquisition is considered to have an indefinite life. During 2017, Sacco reported net income of $50,000 and paid dividends of $20,000 while in 2018 it reported...
On January 1, 2020, Harrison, Inc., acquired 90 percent of Starr Company in exchange for $1,125,000...
On January 1, 2020, Harrison, Inc., acquired 90 percent of Starr Company in exchange for $1,125,000 fair-value consideration. The total fair value of Starr Company was assessed at $1,200,000. Harrison computed annual excess fair-value amortization of $8,000 based on the difference between Starr’s total fair value and its underlying book value. The subsidiary reported net income of $70,000 in 2020 and $90,000 in 2021 with dividend declarations of $30,000 each year. Apart from its investment in Starr, Harrison had net...
On January 1, 2018, Alamar Corporation acquired a 43 percent interest in Burks, Inc., for $192,000....
On January 1, 2018, Alamar Corporation acquired a 43 percent interest in Burks, Inc., for $192,000. On that date, Burks's balance sheet disclosed net assets with both a fair and book value of $327,000. During 2018, Burks reported net income of $83,000 and declared and paid cash dividends of $25,000. Alamar sold inventory costing $22,000 to Burks during 2018 for $39,000. Burks used all of this merchandise in its operations during 2018. Prepare all of Alamar's 2018 journal entries to...
A company (the investor) purchased 40,000 shares of common stock of the investee for $40 per...
A company (the investor) purchased 40,000 shares of common stock of the investee for $40 per share on January 2, 2020. The investee had 100,000 shares of common stock outstanding during 2021, paid cash dividends of $62,000 during 2021, and reported net income of $330,000 for 2021. The investor company should report revenue from investment for 2021 in the amount of....
On January 1, 2020, Sweet Co. purchased 24,000 shares (a 10% interest) in Elton John Corp....
On January 1, 2020, Sweet Co. purchased 24,000 shares (a 10% interest) in Elton John Corp. for $1,300,000. At the time, the book value and the fair value of John’s net assets were $12,900,000. On July 1, 2021, Sweet paid $2,890,000 for 48,000 additional shares of John common stock, which represented a 20% investment in John. As a result of this transaction, Sweet owns 30% of John and can exercise significant influence over John’s operating and financial policies. (Any excess...
On January 1, 2020, Sheridan Co. purchased 24,000 shares (a 10% interest) in Elton John Corp....
On January 1, 2020, Sheridan Co. purchased 24,000 shares (a 10% interest) in Elton John Corp. for $1,360,000. At the time, the book value and the fair value of John’s net assets were $13,400,000. On July 1, 2021, Sheridan paid $3,350,000 for 48,000 additional shares of John common stock, which represented a 20% investment in John. As a result of this transaction, Sheridan owns 30% of John and can exercise significant influence over John’s operating and financial policies. (Any excess...
On January 1, 2020, Jordan Inc. purchased 25% of the outstanding common stock of Melody Corporation...
On January 1, 2020, Jordan Inc. purchased 25% of the outstanding common stock of Melody Corporation at a cost of $450,000. Melody Corporation had 400,000 shares of common stock outstanding. At the date of purchase, the book value of Melody’s net assets was $1,500,000. Book value and fair value of net assets were the same for all balance sheet items except for machinery and inventory. The fair value exceeded the book value by $100,000 for machinery and $20,000 for the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT