Jaynes Inc The Following Figures Came from the Individual Accounting Records of January

question 87

Essay

Jaynes Inc. acquired all of Aaron Co.'s common stock on January 1, 2012, by issuing 11,000 shares of $1 par value common stock. Jaynes' shares had a $17 per share fair value. On that date, Aaron reported a net book value of $120,000. However, its equipment (with a five-year remaining life) was undervalued by $6,000 in the company's accounting records. Any excess of consideration transferred over fair value of assets and liabilities is assigned to an unrecorded patent to be amortized over ten years.
The following figures came from the individual accounting records of these two companies as of December 31,2012:
$\begin{array}{lrrr}&\text { Jaynes Inc. }&\text { Aaron Co. } \\\text { Revenues } & {720,000} & \$ 276,000 \\\text { Expenses } & 528,000 & 144,000 \\\text { Investment income } & \text { Not given } & - \\\text { Dividends paid } & 100,000 & 60,000\end{array}$
The following figures came from the individual accounting records of these two companies as of December 31,2013:
$\begin{array}{lcc}&\text { Jaynes Inc. }&\text { Aaron Co. } \\\hline \text { Revenues } & 840,000 & 336,000 \\ \text { Expenses } & 552,000 & 180,000 \\ \text { Investment income } & \text { Not given } & \text { - } \\ \text { Dividends paid } & 110,000 & 50,000 \\ \text { Equipment } & 600,000 & 360,000 \\\text { Retained earnings, } 12 / 31 / 13 \text { balance } & 960,000 & 216,000 \\\end{array}$ What balance would Jaynes' Investment in Aaron Co. account have shown on December 31, 2012, when the equity method was applied for this acquisition?
An allocation of the acquisition value (based on the fair value of the shares issued) must first be made.

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Definitions:

Constructive Dismissal

A situation in employment law where an employer makes significant changes to an employee's job conditions that effectively force the employee to resign.

Obligation to Mitigate

The duty of a party who has suffered damages to take reasonable action to minimize the amount of the loss.

Torts Committed

Acts or omissions that cause harm or loss, leading to civil legal liability under tort law.

Fiduciary Duty

An obligation wherein an individual must act in the best interest of another person or entity, prioritizing their benefits over their own.