Jansen Inc

question 109

Multiple Choice

Jansen Inc.acquired all of the outstanding common stock of Merriam Co.on January 1, 2017, for $257,000.Annual amortization of $19,000 resulted from this acquisition.Jansen reported net income of $70,000 in 2017 and $50,000 in 2018 and paid $22,000 in dividends each year.Merriam reported net income of $40,000 in 2017 and $47,000 in 2018 and paid $10,000 in dividends each year.What is the Investment in Merriam Co.balance on Jansen's books as of December 31, 2018, if the equity method has been applied?

• A) $286,000.
• B) $295,000.
• C) $276,000.
• D) $344,000.
• E) $324,000.

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Definitions:

Interest Rate

The percentage charged on the total amount borrowed or earned on the total amount saved or invested.

Informationally Efficient

A characteristic of markets where all available information is already reflected in the prices of assets, ensuring that no participant can achieve consistent excess returns.

Fundamental Analysis

A method of evaluating a security by attempting to measure its intrinsic value, involving examination of related economic and financial factors.

Moral Hazard

The situation in which one party is more likely to take risks because another party bears the cost of those risks.