The owners of Rainier Company are 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. Goodwill is measured by capitalizing excess earnings at 25% with normal earnings at 20%. The fair value of the net assets of the entity at current year-end was P10,000,000. What is the acquisition cost of the entity? A. 16,400,000 в. 14,000,000 C. 14,400,000 р. 15,200,000
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- Buchanan Imports purchased McLaren Corporation for $5,000,000 cash when McLaren had net assets worth $4,500,000. A. What is the amount of goodwill in this transaction? B. What is Buchanans journal entry to record the purchase of McLaren? C. What journal entry should Buchanan write when the company internally generates additional goodwill in the year following the purchase of McLaren?On May 1, 2015, Zoe Inc. purchased Branta Corp. for $15,000,000 in cash. They only received $12,000,000 in net assets. In 2016, the market value of the goodwill obtained from Branta Corp. was valued at $4,000,000, but in 2017 it dropped to $2,000,000. Prepare the journal entry for the creation of goodwill and the entry to record any impairments to it in subsequent years.An entity 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 the entity at current year end was P10,000,000. 1. What is the purchase price if goodwill is measured by capitalizing excess earnings at 25%?2. What is the purchase price if goodwill is measured by capitalizing average annual earnings at 25%?
- Robinson Company purchased Franklin Company at a price of $2,500,000. The fair market value of thenet assets purchased equals $1,800,000. Does Robinson amortize goodwill at year-end for financial reporting purposes? If so, over how many years is it amortized?At year-end, QRS Company reported assets of P5,000,000 and liabilities of P2,000,000. The carrying amounts of the assets approximate fair value, except for land which has a fair value that is P300,000 greater than carrying amount. On same date, RST Company paid P6,000,000 to acquire QRS Company. Determine the amount of goodwill that should be recorded by the acquirer as a result of this purchase. a. 1,000,000 b. 3,300,000 c. 2,700,000 d. 3,000,000Northern Company acquired Southern Company. The purchase price included all Southern's assets and liabilities and was in the amount of $673,750. Below is information related to the two companies: Northern $1,052,000 Fair value of assets Fair value of liabilities Reported assets Reported liabilities Net income for the year How much goodwill will Northern record in its acquisition of Southern? 585,000 806,000 488,000 41,000 Southern $784,000 302,000 649,000 264,000 65,000
- Short Corporation acquired Hathaway, Inc., for $32,620,000. The fair value of all Hathaway's identifiable tangible and intangible assets was $31,800,000. Short will amortize any goodwill over the maximum number of years allowed. What is the annual amortization of goodwill for this acquisition?On September 1, 2020, Culver Corporation acquired Splish Brothers Enterprises for a cash payment of $690,000. At the time of purchase, Splish Brothers’s balance sheet showed assets of $620,000, liabilities of $240,000, and owners’ equity of $380,000. The fair value of Splish Brothers’s assets is estimated to be $860,000.Compute the amount of goodwill acquired by Culver.Better Company is negotiating to acquire the net assets of Best Company. Better is willing to pay for goodwill computed by capitalizing at 20% Best' average earnings in excess of the 10% normal return based on appraised value of net assets. The assets and liabilities of Best Company at appraised values are P39,000,000and P10,500,000 respectively. Best' income for the past three years average P2,950,000. What is the amount of goodwill?
- Paula Company had the following property acquisitions during the current year: Acquired a tract of land and building in exchange for 50,000 ordinary shares of P100 par value with a market price of P120 per share on the date of acquisition. The last property tax bill indicated an assessed value of P1,200,000 for the land and P2,800,000 for the building. However, the land has a fair value of P2,000,000 and the building has a fair value of P3,500,000. Received land from a major shareholder as an inducement to locate the plant in the city. No payment was required but the entity paid P50,000 for legal expenses for land transfer. The land is fairly valued at P1,000,000. Acquired a welding machine with an invoice price of P3,000,000 subject to a cash discount of 10% which was not taken. The entity incurred cost of P50,000 in removing the old welding machine prior to the installation of the new one. Welding supplies were acquired at a cost of P150,000. What is the total increase in property,…Akron, Inc., owns all outstanding stock of Toledo Corporation. Amortization expense of $15,000 per year for patented technology resulted from the original acquisition. For 2018, the companies had the following account balances: Akron ToledoSales . . . . . . .. $1,100,000 $600,000Cost of goods sold 500,000 400,000Operating expenses 400,000 220,000Investment income . . Not given –0–Dividends declared . . .80,000 30,000 Intra-entity sales of $320,000 occurred during 2017 and again in 2018. This merchandise cost $240,000 each year. Of the total transfers, $70,000 was still held on December 31, 2017, with $50,000 unsold on December 31, 2018.a. For consolidation purposes, does the direction of the transfers (upstream or downstream) affect the balances to be reported here?b. Prepare a consolidated income statement for the year ending December 31, 2018.Brinker International Inc.the parent of Chili's, acquired Thallicious for $32,170,000. The fair value of all Thailicioustangible and intangible assets was $30.000.000 Brinker will amortize any goodwill over the maximum number of years allowedWhat is the annual amortization of goodwill for this acquisition?