Valix Finacc vol 1 Problem 20-24

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 20 Problem 20-24

1.  Average earnings                                                                                                      250,000

     Divide by                                                                                                                        10%     

     Net assets including goodwill                                                                                2,500,000

     Less: Net assets before goodwill                                                                            1,700,000

     Goodwill                                                                                                                   800,000

2.  Average earnings                                                                                                      250,000

     Less: Normal earnings (8% x 1,700,000)                                                                      136,000

     Excess earnings                                                                                                          114,000

     Divide by                                                                                                                        15%

     Goodwill                                                                                                                   760,000

                                                                                                         

3.  Average earnings                                                                                                      250,000

     Less: Normal earnings (10% x 1,700,000)                                                                     170,000

     Excess earnings                                                                                                            80,000

     Multiply by                                                                                                                           5

     Goodwill                                                                                                                   400,000

4.  Excess earnings                                                                                                            80,000 

     Multiply by                                                                                                                      5.65

     Goodwill                                                                                                                   452,000