Problem 1-8 (LO 1-3, 1-4)

Franklin purchases 40 percent of Johnson Company on January 1 for $610,500. 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 $1,567,000 with liabilities of $580,000. One building with a seven-year remaining life life is undervalued on Johnsons books by $141,750. Also, Johnsons book value for its trademark (10-year life) is undervalued by $397,500. During the year, Johnson reports net income of $99,000 while declaring dividends of $30,000. What is the Investment in Johnson Company balance (equity method) in Franklins financial records as of December 31?

Multiple Choice

$653,700.

$622,200.

$638,100.

$614,100.