Jaynes Inc $\text {The following figures came from the individual accounting records of these two companies of December 31, 2010}$

question 75

Essay

Jaynes Inc.acquired all of Aaron Co.'s common stock on January 1,2010,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.
$\text {The following figures came from the individual accounting records of these two companies of December 31, 2010}$
$\begin{array} { l r c } & \text { Jaynes Inc. } & \text { Aaron Co. } \\ \text { Revenues } & \$ 720,000 & \$ 276,000 \\ \text { Expenses } & 528,000 & 144,000 \\ \text { Investment income } & \text { Not given } & - \\ \text { Dividends paid } & 100,000 & 60,000 \\ & & \\ \text { The following figures came from the individual accounting records of these two } \\ \text { companies of December } 31,2011 & & \\ & \text { Jaynes Inc. } & \text { Aaron Co. } \\ \text { Revenues } & \$ 840,000 & \$ 336,000 \\ \text { Expenses } & 552,000 & 180,000 \\ \text { Investment income } & \text { Not given } & - \\ \text { Dividends paid } & 110,000 & 50,000 \\ \text { Equipment } & 600,000 & 360,000 \\ \text { Retained earnings, 12/31/11 balance } & 960,000 & 216,000 \end{array}$
-What balance would Jaynes' Investment in Aaron Co.account have shown on December 31,2010,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:

Equivalent Units

A concept used in process costing that converts partially completed units into a smaller number of fully completed units.

Conversion Costs

The combined costs of direct labor and manufacturing overhead, representing the expenditures to convert raw materials into finished goods.

Conversion Costs

The combined costs of direct labor and manufacturing overhead, representing the expenses to convert raw materials into finished goods.

Cost Per Equivalent Unit

A calculation used in process costing, dividing the total cost by the number of units produced to determine the cost per unit.