Under capitalization method, goodwill is calculated by: a. Super profits X 100/Normal Rate of Return b. Average profits X Normal Rate of Return/100 c. Average profits X Number of years of purchase d. Super profits X Number of years of purchase

Under capitalization method, goodwill is calculated by: a. Super profits X 100/Normal Rate of Return b. Average profits X Normal Rate of Return/100 c. Average profits X Number of years of purchase d. Super profits X Number of years of purchase

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter17: Dynamic Capital Structures And Corporate Valuation

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Which of the following statements is true regarding goodwill?

A: Goodwill: Goodwill is an intangible asset . This enables the firm to earn more than the other…

Q: 11. In recording exchanges of assets, which statement is not true? a. When boot is received for a…

A: Exchange of Similar assets Accounting for non-monetary transactions should be determined based on…

Q: Consider the following cash flows: Year Cash Flow -$28,600 15,100 13,800 10,200 1 2 3 a. What is the…

A: profitability index is given by present value of cash flow to initial investment. Profitability…

Q: - Under capitalization method, goodwill is calculated by: a. Average profits X Normal Rate of…

A: Solution: Under super profit method goodwill is calculated by = Super Profits x (100/ Normal Rate of…

Q: What is goodwill? Is goodwill amortized? What happens if the value of goodwill has decreased at the…

A: Goodwill: Goodwill is an intangible asset. It is defined as the excess of cost of an acquired…

Q: 11. "The amount at which an asset could be exchanged, or a liability settled, between knowledgeable,…

A: Correct answer is :- A.) Fair Value

Q: Value-in-use is O a. The discounted present value of future cash flows arising from use of the asset…

A: Value-in-use:-It is future cash inflows and outflows which arise from the continuous use of assets…

Q: Assume a corportation has earnings before depreciation and taxes of $100,000, depreciation of…

A: Information Provided: EBIT = $100,000 Depreciation = $50,000 Tax = 30%

Q: For assets acquired on credit or by installment, the cost or fair value is equal to: A. cash…

A: The fixed assets are the assets acquired by the business to use for long run.

Q: will be depreciated by the MACRS (GDS) straight-line method of depreciation. The effective income…

A: AE = First cost + PV of after-tax operating expense - PV of tax savings on depreciation…

Q: Which one of the following is not a method of valuation of goodwill? a. Super profit method b.…

A: Goodwill can be calculated by various methods suitable for various businesses considering various…

Q: Compare between the following two (After Tax cash flow) machines using internal rate of retura…

A: Internal rate of return is the real return from an investment or a machine by considering future…

Q: If on the fourth year the cash inflows is P120,000 which present value factor are you going to use…

A: Period (n) = 4 Years Interest rate (r) = 12%

Q: A corporation with a 27% combined income tax rate is considering the following investment in…

A: Internal rate of Return: IRR is the annual rate of growth an investment is expected to generate.…

Q: ear Cash Flow ($) 0 17,700 1 10,000 2 8,900 3 5,400 What is the…

A: The data set is: Year Cash Flow 0 17700 1 10000 2 8900 3 5400

Q: Which of the following payback methods assumes that the asset acquired may not last its estimated…

A: Capital Budgeting technique: It is the process by which value of a potential investment project is…

Q: Calculate a firm's free cash flow if it has net operating profit after taxes of R60,000,…

A: Free cash flow to the firm (FCFF) represents the cash flow from operations available for…

Q: If an asset increases in value, the increase is noted as________. Select one: a. an increase in net…

A: An increase in value of an asset can be result of revaluation gain on asset or reversal of…

Q: The carrying value of your cash-generating unit: Assets OMR 10m + Goodwill OMR 3m and Its…

A: Impairment loss is calculated as Carrying amount. XXX Less: recoverable amount. XXX…

Q: Assets acquired ina lump-sum purchase are valued based on: a. Their assessed valuation. b. Their…

A: As per IAS 16, when more than one item of property, plant, and equipment is purchased for a…

Q: non-dividend paying financial asset has a price of $200 and a oneyear future on this asset has price…

A: Arbitrage is risk less profit that can be earned in two markets due to mispricing in two markets and…

Q: 5). Intangible assets are initially recorded at (a). cost (b). expected future value (c). expected…

A: The intangible asset seems to be a resource that provides long-term value for a firm but it has no…

Q: Under PAS 1, which of the followingitem is not included in the computation of profit? Finance…

A: PAS 1 : It is an accounting standard under Philippines Accounting Standards, the standard…

Q: What is the present value of the following cash flow stream at a rate of 12.00%? Years: 0 1 2…

A: Present Value Present value is the present worth of any sum of money to be received in the future at…

Q: 10) Find the present value of the following stream of a firm's cash flows, assuming that the firm's…

A: It can be calculated by discounting the future cash flows at opportunity cost or required rate of…

Q: Which of the following investments has a higher present value, assuming the same (strictly positive)…

A: We will assume a rate of 9% for a better explanation

Q: Determine the estimated value of Entity E assuming goodwill is computed through capitalization of…

A: Answered:

Q: Th e initial measurement of goodwill is most likely aff ected by: A . an acquisition’s purchase…

A: Goodwill is an intangible asset which appears under the assets section of the balance sheet. The…

Q: Refer to the situation described in BE 11–13. Assume that the present value of the estimated future…

Q: 11. Which type of financial assets are purchased only with the intent of selling them in the near…

A: FVTPL is subsequently measured at fair value Any gain and loss in the fair value measurement to be…

Q: not a method of valuation of goodwil

A: Goodwill is the value of a business in the eyes of external parties. This shows the supremacy of the…

Q: What is the Modified Internal Rate of Return of Mazgaon using the reivestment approach if the…

A: The Modified internal rate of return can be calculated as follows :

Q: 18.Net realizable value is a. acquisition cost plus estimated costs to complete and sell b.…

A: Introduction:- Net realizable value method used for valuation of the ending inventory. Net…

Q: 25. A parent company’s investment account would include an element which is representative of :…

A: In the context of the given question, we are required to find the correct option from the available…

Q: The fair value of an asset stood at OMR 300 and cost to sell these assets in the market is OMR 40.…

A: According to IAS 36 (Impairment of assets), it states that the assets of the business are not…

Q: The total after-tax cash outflow for: leasing = $70,700.00 ; purchase = $61,702.19 The present…

A: Present value of cash flow is the current value of a cash flow which takes place in future. To find…

Q: u sell a fixed asset for $75,000 when its book value is $80,000. If your company's marginal t sh…

A: Given, Sale value = $75,000 Book value = $80,000 Tax rate = 21%

Q: If you have $100K, and want to invest in assets A, B and C. Asset A has historical AVG return of…

A: Generally, we invest more in the asset which gives ore return. The assets have more return will have…

Q: The present value of the net cash flows for Product A is $65,145 while the cost of the initial…

A: The question is based on the concept of Financial Management. Profitability index is the ratio of…

Question

100%

25. Under capitalization method, goodwill is calculated by:

Super profits X 100/Normal Rate of Return

Average profits X Normal Rate of Return/100

Average profits X Number of years of purchase

Super profits X Number of years of purchase

Definition Definition Intangible asset that includes proprietary or intellectual property and brand value of a firm. Goodwill is recorded in the books when a firm purchases another firm and the purchase price is more than the fair value of net identifiable assets of the acquired business. The amount of goodwill is recorded on the asset side of the balance sheet (statement of financial position).

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Answer:

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

An overall capitalization rate (Ro) is divided into which type of income or cash flow to obtain an indicated market value? Multiple Choice Net operating income (NO) Effective gross Income (EG) Before-tax cash flow (BTCA) After-tax cash flow (ATCA) Potential gross income (PG)
Value-in-use is 14 O a. The discounted present value of future cash flows arising from use of the asset and from its disposal. O b. The amount at which an asset is recognized in the statement of financial position. 21 O c. The higher of amasset's fair value less cost to sell and its market value. 28 O d. The market value.
A net present worth equation is used to solve for a ROR by setting the net present worth equation Equal to: Select one: a. -1 b. -10 c. zero d. 1
8. In a lump-sum purchase of assets, the relative-sales-value is defined as the: A)total price paid less the value of the most valuable asset. B)total price paid compared to the total market value. C)ratio of each asset's market value to the total market value. D)ratio of each asset's market value to the total book value.
In a DuPont analysis, what are the components of return on assets?a. Net Profit Margin Ratio and Debt Ratiob. Net Profit Margin Ratio and Leverage Ratioc. Net Profit Margin Ratio and Asset Turnover Ratiod. Asset Turnover Ratio and Leverage Ratio
In a theoretical sense, the financial value of any asset is the present value of: Select one: A. Its past dividends B. Its expected cash flows C. Its expected sales price D. Its operating earnings
i. Using an example, briefly explain to Mr. Dates what is meant by mutually exclusiveinvestments.ii. Compute each investment’s payback period.iii. Compute each investment’s Net Present Value (NPV).
j. calculate the EBIT: calculate the net income: calculate the OCF: what is the depreciation tax shield:
11. Which type of financial assets are purchased only with the intent of selling them in the near future? DAFVTPL financial assets ⒸBFVTOCI Financial assets C. Amortized Cost financial assets OD. Investment accounted for using the equity method
Profit is earned on sale of asset when a. Sale price is less than Accumulated Depreciation b. Sale price is more than Accumulated Depreciation c. Sale price is more than book value d. Sale price is less than book value
15. Which one of the following is not a method of valuation of goodwill? a. Average profit method b. Revaluation method c. Super profit method d. Capitalization method
a) Net Present Value (Present Worth); b) Internal Rate of Return (IRR);c) External Rate of Return (ERR);d) Simple Payback Period