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? $513,900. $504,000. $507,600. $516,000.
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? $513,900. $504,000. $507,600. $516,000.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text: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?
$513,900.
$504,000.
$507,600.
$516,000.
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