On January 1, 2010, Franel Co

question 115

Multiple Choice

On January 1, 2010, Franel Co. acquired all of the common stock of Hurlem Corp. For 2010, Hurlem earned net income of $360,000 and paid dividends of $190,000. Amortization of the patent allocation that was included in the acquisition was $6,000. How much difference would there have been in Franel's income with regard to the effect of the investment, between using the equity method or using the initial value method of internal recordkeeping?

• A) $190,000.
• B) $360,000.
• C) $164,000.
• D) $354,000.
• E) $150,000.

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Definitions:

Relatively Elastic

Describes a situation where the quantity demanded of a good or service greatly changes in response to changes in its price.

Quantity Demanded

The total amount of a good or service that consumers are willing to purchase at a given price level in a given period.

Coefficient

A numerical value that multiplies a variable in an equation, serving as a measure of some property or characteristic.

Price Elasticity

Refers to how sensitive the quantity demanded of a good is to a change in its price.