Franklin purchases 40 percent of Johnson Company on January 1 for $604,600. 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 $1,518,000 with liabilities of $598,000. One building with a seven-year remaining life is undervalued on Johnson’s books by $311,500. Also, Johnson’s book value for its trademark (10-year remaining life) is undervalued by $280,000. During the year, Johnson reports net income of $112,000 while declaring dividends of $50,000. What is the Investment in Johnson Company balance (equity method) in Franklin’s financial records as of December 31?
Franklin purchases 40 percent of Johnson Company on January 1 for $604,600. 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 $1,518,000 with liabilities of $598,000. One building with a seven-year remaining life is undervalued on Johnson’s books by $311,500. Also, Johnson’s book value for its trademark (10-year remaining life) is undervalued by $280,000. During the year, Johnson reports net income of $112,000 while declaring dividends of $50,000. What is the Investment in Johnson Company balance (equity method) in Franklin’s financial records as of December 31?
purchase price of stock is 604600
book value ( 1518000-598000) * 40% is 368000
cost in excess of book value = 236600
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