Question
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
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 Johnsons 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 life is undervalued on Johnsons books by $311,500. Also, Johnsons book value for its trademark (10-year 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 Franklins financial records as of December 31?
a. $618,200.
b. $600,400.
c. $629,400.
d. $645,200.
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