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.

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.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 10PA: Buchanan Imports purchased McLaren Corporation for $5,000,000 cash when McLaren had net assets worth...

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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?
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
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