On January 1, 2014, Alison, Inc., paid $73,900 for a 40 percentinterest in Holister Corporation’s common stock. This investee hadassets with a book value of $251,500 and liabilities of $122,500. Apatent held by Holister having a $8,100 book value was actuallyworth $30,600. This patent had a six-year remaining life. Anyfurther excess cost associated with this acquisition was attributedto goodwill. During 2014, Holister earned income of $49,500 anddeclared and paid dividends of $17,000. In 2015, it had income of$64,500 and dividends of $22,000. During 2015, the fair value ofAllison’s investment in Holister had risen from $88,700 to$94,900.
a.
Assuming Alison uses the equity method, what balance shouldappear in the Investment in Holister account as of December 31,2015?
b.
Assuming Alison uses fair-value accounting, what income from theinvestment in Holister should be reported for 2015?
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