Illustration 1: Determine the value of goodwill based on 3 years purchase of last 5 years averageprofit, from the following information of a partnership firm of Nilesh and Nikunj. Last five years'profit information is as under:YearProfit2011-122,00,0002012-132,10,0002013-141,90,0002014-152,15,0002015-162,20,000

To determine the value of goodwill based on 3 years' purchase of the last 5 years' average profit,…

Answered: Illustration 1: Determine the value of…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter12: Intangibles

Section: Chapter Questions

Problem 10RE

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24) Calculate goodwill at three year purchase of the average profits of last five years profits. The profits of the last five years were RO. 23,000, RO. 27,000, RO. 32,000, RO. 20,000 and RO. 18,000 Therefore, the amount of goodwill will be: a. RO 72,000 b. RO 144,000 c. RO 24,000 d. RO 36,000
1. The Goodwill is to be valued at two years' purchase of last four years' average profit. The profits were R.O 40, 000, R.O 32,000, R.O 15,000 and R.O 13,000 respectively. Find out the value of goodwill.
1. ANEMONE Company engaged your services to compute the goodwill in the purchase of another company which provided the following: Net income Net assets 2018 P 2,000,000 P 7,800,000 2019 2,500,000 8,700,000 2020 3,900,000 9,000,000 Goodwill is measured by capitalizing excess earnings at 25% with normal on average net assets at 20% How much is the goodwill?
Calculate the total goodwill for a pro forma balance sheet given the following details. Details: Equity purchase price: $2,000 Book value: $1,700 Existing goodwill: $100 A. $100 B. $300 C. $200 D. $400
Narnia company have the following data relative to a certain entity in determining the amount to be paid for net assets and goodwill: Assets at fair value before goodwill 3,900,000 Liabilities 1,350,000 Shareholders’ equity 2,550,000 Average earnings for five years amounted to 375,000 and a return of 8% on net assets is considered normal. Compute the goodwill if excess earnings is capitalized at 15%.
During the past two years, through extensive advertising and improved customer relations, jEAN Corporation estimated that it had developed customer goodwill worth $500,000. For the current year, determine the amount of goodwill Orange may amortize. a.$26,667 b.$-0- c.$16,667 d.$33,333
In which of the following situations would Martinez Indus-tries include goodwill in its balance sheet? a. The fair market value of Martinez’s net identifiableassets amounts to $2,000,000. Normal earnings for thisindustry are 15 percent of net identifiable assets. Netincome for the past five years has averaged $390,000.b. Martinez spent $800,000 during the current year for research and development for a new product that prom-ises to generate substantial revenue for at least 10 years. c. Martinez acquired Baxter Electronics at a price in excess ofthe fair market value of Baxter’s net identifiable assets. d. A buyer wishing to purchase Martinez’s entire opera-tion has offered a price in excess of the fair market value of the company’s net identifiable assets.
Compute the amount of acquired Goodwill, including contingent earnings and bargain purchase Assume that you are charged with assigning fair values related to a $3,800,000 acquisition. You determine that the fair value of the net identifiable tangible assets is $1,850,000. You also conclude that the purchase included a Customer List with a fair value at $340,000. a. How much Goodwill will you record in this acquisition? $ 1,610,000 ✓ b. Continuing from part (a), now also assume that the purchase and sale agreement requires the payment of an additional $925,000 if the subsidiary achieves a certain level of earnings. You estimate the fair value of that contingent earnings clause in the agreement to be $220,000. How does this additional information affect your computation of Goodwill? The amount of Goodwill recorded is $ 1,830,000 c. This part of the exercise is independent parts (a) and (b). Assume that the purchase price is $3,800,000 and that fair value of the net identifiable tangible…
Computation of goodwill Assume that an investor purchases 100% of an investee company for $24 million in a transaction that qualifies as a business combination. The fair values of the identifiable net assets are as follows: Tangible net assets: Receivables, inventories, PPE, payables, and accruals $8 million Intangible assets: Patents, customer lists, trade name, software, etc. 5 million Research and development assets: Research projects in process at the investee company 6 million In addition to the purchase price, the Investor also incurs acquísition-related costs amounting to $1.8 million for professional fees and the internal allocation of overhead relating to the purchase. a. How much of the purchase price is assigned to Goodwill? $4 million
13. Karen Company engaged your services to compute for the goodwill in the purchase of another entity which provided the following: Year Net Income Net Assets 2016 Php 1,000,000 Php 3,900,000 2017 Php 1,250,000 Php 4,350,000 2018 Php 1,950,000 Php 4,500,000 Goodwill is measured by capitalizing excess earnings at 25% with normal return on average net assets at 20%. How much is the purchase price?
Calculate the goodwill from the business combination. A. P10,000,000 C. P10,040,000 B. P10,025,000 D. P10,060,000
Topic: Intangible Assets (Goodwill) Guinevere Company is planning to sell the business to new interests. The cumulative net earnings for the past five years amounted to P16,500,000 including expropriation loss of P1,500,000. The normal rate of return is 20%. The fair value of net assets of entity at current year end was P10,000,000. What is the amount of goodwill if: 1. Excess earnings are purchased for 5 years? A. 8,000,000 B. 4,000,000 C. 5,000,000 D. 4,500,000 2. Excess earnings are capitalized at 25%? A. 7,200,000 B. 6,400,000 C. 8,000,000 D. 3,600,000 3. Annual average earnings are purchased for 3 years? A. 10,800,000 B. 18,000,000 C. 4,800,000 D. 5,400,000 4. Annual average earnings are capitalized at 25%? A. 1,600,000 B. 3,600,000 C. 4,400,000 D. 2,000,000 5. Excess earnings are discounted at 12% for 5 years? (the PV of an ordinary annuity of 1 for 5 years at 12% is 3.60) A. 12,960,000 B. 10,800,000 C. 5,760,000 D. 7,200,000

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