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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 companys 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. What balance would Jaynes Investment in Aaron Co. account have shown on December 31, 2010, when the equity method was applied for this acquistion? (Show your work.)
The following figures came fromteh individual accounting records of these two companies as of December31,2010:
Haynes Inc. Aaron Co.
Revenues 720000 276000
Expenses 528000 144000
Investment income Not given ----
Dividends paid 100000 60000
The following figures came from the individual accounting records of these two companies as of December 31, 2011:
Revenue 840000 336000
Expenses 552000 180000
Investment income Not given ------
Dividends paid 110000 50000
Equipment 600000 360000
Retained earnings,
12/31/11 balance 960000 216000
If this combination is viewed as an acquisition what balance would Jaynes “investment in Aaron Co. account have shown on December 31 2010 when the equity method was applied
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