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

question 100

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 was consolidated equipment as of December 31, 2013?

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Definitions:

Black-Scholes

A mathematical model used to price European call and put options, evaluating the options based on the stock price, strike price, volatility, expiration time, and risk-free interest rate.

Strike Price

The price at which the holder of an option contract can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.

Pricing Model

A set of criteria or strategies used to determine the selling price of a product or service.

In The Money

Describes an option with intrinsic value, where call options have a strike price below the market price of the underlying, and put options have a strike price above it.