Valix Finacc vol 1 Problem 20-26

Financial Accounting Volume 1 2008 Valix-Peralta
Chapter 20 Problem 20-26

a. Average earnings                                                                                                       750,000

     Expected increase (1,000,000 – 900,000)                                                                    100,000

     Total                                                                                                                          850,000

     Less: Normal earnings (4,800,000 x 10%)                                                                     480,000

     Excess earnings                                                                                                          370,000

     Goodwill (370,000 x 4)                                                                                            1,480,000

     Shareholders’ equity per book                                                                               5,000,000

     Less: Recorded goodwill                                                                                           200,000

     Net assets before goodwill                                                                                    4,800,000

b. Goodwill (370,000 / 20%)                                                                                         1,850,000