4) James Corporation purchased a 20% interest in Frankie Company common stock on January 1, 2008 for $300,000. This investment was accounted for using the complete equity method and the correct balance in the Investment in Frankie account on December 31, 2010 was $440,000. The original excess purchase transaction included $60,000 for a patent amortized at a rate of $6,000 per year. In 2011, Frankie Corporation had net income of $4,000 per month earned uniformly throughout the year and paid $20,000 of dividends in May.

Required: If James sold one-half of its investment in Frankie on August 1, 2011 for $500,000, calculate the amount of gain was recognized on the sale: (use the grid below for your calculations and answer)

Dec 31, 2010 investment balance	$440,000
add: James's interest in Frankie's income from Jan 1-July 31:
Less: Dividends
Less: Seven months of patent amortization:
= Investment account balance at July 31, 2011
Amount received from sale:
Minus: Book value of one-half interest
Gain on sale