Question

Problem 1-8 (LU 1-3, 1-4) 00 Franklin purchases 40 percent of Johnson Company on January 1 for $617,100. 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 $1,515,000 with liabilities of $548,000. One building with a seven-year remaining life life is undervalued on Johnson's books by $243,250. Also, Johnson's book value for its trademark (10-year life) is undervalued by $332,500. During the year, Johnson reports net income of $140,000 while declaring dividends of $70,000. What is the investment in Johnson Company balance (equity method) in Franklin's financial records as of December 31? points

Answer 1

financial position date Johnson Company of on the Puncan Assets value = $1,515,000 --($548,000) (-) Liability $ 9, 67 yooo Net Assets $3,861800 Holding %) 40% value [9.67,000 X 40%) Actual cost & Amout paid] $617,100 $ 2.30, 300 good will value

Amount $617,000 Particulary Investment value Including good will = as on January - 1st (t) Probit on Revelation of building $243250 x 400.) osso $ 13,900 7 (+) $13,300 probition Revelation of Trademark $3,32,500 x 40%) 100 (+) o Net Income ( $140,000 x 40.) $56,000 declared dividendo [ $70000&yon] $ 28,000) Investment value in Thonson company Including good will as on 31l Dec $672,200 to who do ouro