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Monday, November 15, 2010

Valix Finacc vol 1 Problem 20-35 to 40

Financial Accounting Volume 1 2008 Valix-Peralta
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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