Chapter 20 Problem 20-35 to 40
Problem 20-35 Answer C
Cost 357,000
Accumulated amortization from 2005 to 2007 (357,000 / 15 x 3) 71,400
Book value – 12/31/2007 285,600
Amortization for 2008 (285,600 / 7) 40,800
Book value – 12/31/2008 244,800
Problem 20-36 Answer C
Cost 1/1/2003 6,000,000
Accumulated depreciation – 12/31/2007 (6,000,000 / 15 x 5) 2,000,000
Book value – 1/1/2008 4,000,000
Amortization for 2008 (4,000,000 / 5) 800,000
Problem 20-37 Answer C
Cumulative earnings 550,000
Less: Gain on sale 50,000
Adjusted cumulative earnings 500,000
Average earnings (500,000 / 5) 100,000
Divide by capitalization rate 10%
Net assets including goodwill 1,000,000
Less: Net assets before goodwill 750,000
Goodwill 250,000
Problem 20-38 Answer C
Net assets 1,800,000
Multiply by excess rate (16% minus 10%) 6%
Excess earnings 108,000
Multiply by present value factor 3.27
Goodwill 353,160
Problem 20-39 Answer D
Purchase price 5,000,000
Less: Goodwill 500,000
Net assets before goodwill 4,500,000
Estimated annual earnings (squeeze) 550,000
Less: Normal earnings (4,500,000 x 10%) 450,000
Excess or superior earnings 100,000
Divide by capitalization rate 20%
Goodwill 500,000
Problem 20-40 Answer C
Accounts receivable 2,000,000
Inventory 500,000
Equipment 500,000
Short-term payable (2,000,000)
Net assets at fair value 1,000,000
Acquisition cost 5,000,000
Net assets at fair value (1,000,000)
Goodwill 4,000,000
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