Niagara Company is contemplating to acquire Toronto, Inc. on January 1, 2020. The informationon Toronto's profit and net assets for the last five years is as follows:Net AssetsP20,200,000Profit2019P 4,000,00020183,200,0003,000,0003,800,00020,000,000201718,500,000201617,900,00020152,500,00015,600,000It is agreed that Niagara is willing to pay for goodwill measured by capitalizing at 40% excess ofthe average profits over normal return on net assets. The normal return on average net assets forthe industry to which Toronto belongs is 10%.How much should Niagara Company pay to Toronto, Inc. in the acquisition of the latter's netassets?

Calculation of Goodwill on acquisition Good Will Valuation

1 18rohto s profit ar net as of the last five years is as IOws: Net Assets Profit P 4,000,000 3,200,000 3,000,000 019 P20,200,000 018 017 016 015 20,000,000 18,500,000 3,800,000 17,900,000 2,500,000 15,600,000 is agreed that Niagara is willing to pay for goodwill measured by capitalizing at 40% excess o e average profits over normal return on net assets. The normal return on average net assets e industry to which Toronto belongs is 10%.

1 18rohto s profit ar net as of the last five years is as IOws: Net Assets Profit P 4,000,000 3,200,000 3,000,000 019 P20,200,000 018 017 016 015 20,000,000 18,500,000 3,800,000 17,900,000 2,500,000 15,600,000 is agreed that Niagara is willing to pay for goodwill measured by capitalizing at 40% excess o e average profits over normal return on net assets. The normal return on average net assets e industry to which Toronto belongs is 10%.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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