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Franklin purchases 40 percent of Johnson Company on January 1 for $500000 Although Franklin did not use it this acquisition gave Franklin the ability to apply significant influence to Johnson’s

Franklin purchases 40 percent of Johnson Company on January 1 for $500,000. Although Franklin did not use it, this acquisition gave Franklin the ability to apply significant influence to Johnson’s operating and financing policies. Johnson reports assets on that date of $1,400,000 with liabilities of $500,000. One building with a 7-year remaining life is undervalued on Johnson’s books by $140,000. Also, Johnson’s book value for its trademark (10-year remaining life) is undervalued by $210,000. During the year, Johnson reports net income of $90,000 while declaring dividends of $30,000. What is the Investment in Johnson Company balance (equity method) in Franklin’s financial records as of December 31?

a. $504,000.

b. $507,600.

c. $513,900.

d. $516,000.

Jul 22 2020 View more View Less

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