4. Magsano Company is planning to sell the business to new interests. The accumulative net earnings for the past five years amounted to P9,500,000. The normal rate is 20%. The fair value of net assets of the entity at the current year-end was $7,000,000. What is the amount of goodwill if excess earnings are purchased for 5 years? a. 7,000,000 b. P 2,050,000 c. P 2,000,000 d. P 1,000,000

4. Magsano Company is planning to sell the business to new interests. The accumulative net earnings for the past five years amounted to P9,500,000. The normal rate is 20%. The fair value of net assets of the entity at the current year-end was $7,000,000. What is the amount of goodwill if excess earnings are purchased for 5 years? a. 7,000,000 b. P 2,050,000 c. P 2,000,000 d. P 1,000,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Fat Crane's Service Shop started the year with total assets of $324000 and total liabilities of $232000. During the year, the business recorded $639000 in revenues, $431000 in expenses, and paid dividends of $60400. The net income reported by Fat Crane's Service Shop for the year was $232000. $208000. $147600. $268400.
Hw.54. Leader has business assets worth $8 million and NOL carryovers of $1million expiring in 14 years and of $2 million expiring in 15 years, and 100 percent of Leader’s stock is worth $10 million. If Leader sells its business assets without recognizing gain or loss, Leader can invest its $8 million liquid assets in US T-Bills earning 2.1% so that Leader can use its NOLs at the rate of $168,000 per year. The long-term tax-exempt rate is 1.71%. What will the “the §382 limitation” be if an ownership change occurs with respect to Leader’s stock? Will Leader be able to utilize the NOL’s before they expire?
This year, Industrial Consolidated reported depreciation expense of $85,000 on its income statement while reporting Net Fixed Assets of $1,200,000 on its balance sheet. Last year, it reported depreciation expense of $110,000 and net fixed assets of $1,350,000. What was Net Capital Spending this year? Question 6 options: ($40,000) $70,000 $45,000 $260,000 ($65,000)
Upper Division of Lower Company acquired an asset with a cost of $580,000 and a four-year life. The cash flows from the asset, considering the effects of inflation, were scheduled as follows. Year Cash Flow 1 $ 210,000 2 250,000 3 285,000 4 320,000 The cost of the asset is expected to increase at a rate of 20 percent per year, compounded each year. Performance measures are based on beginning-of-year gross book values for the investment base. Ignore taxes. Required: a. What is the ROI for each year of the asset's life, using a historical cost approach? b. What is the ROI for each year of the asset's life if both the investment base and depreciation are determined by the current cost of the asset at the start of each year?
Meryll Company is negotiating to acquire the net assets LeMans Company. Under the plan, Meryll is willing to pay for goodwill computed by capitalizing at 25% LeMans’ average earnings in excess of the 10% normal return based on appraised value of net assets. This is the same level of income experienced by companies similar to LeMans line of business. LeMans' income for the past three years averaged P3,000,000. LeMans’ assets and liabilities are Book Value Appraised ValueAssets excluding goodwill P30,000,000 P39,000,000Liabilities 10,500,000 10,500,000
Book value and taxes on sale of assets Troy Industries purchased a new machine 4 year(s) ago for $82,000. It is being depreciated under MACRS with a 5-year recovery period using the schedule. Assume 21% ordinary and capital gains tax rates. a. What is the book value of the machine? b. Calculate the firm's tax liability if it sold the machine for each of the following amounts: $98,400; $57,400; $13,940; and $9,800. a. The remaining book value is $ (Round to the nearest dollar.) Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Recovery year 1 2 3 4 10 years 10% 18% 14% 12% 9% 8% 7% 6% 6% 6% 4% 100% 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual unrounded percentages or…
On 6/1/24, Lansing Company sold equipment to Kirk Landscaping Service in exchange for a zero - interest bearing note with a face value of $110,000, with payment due in 12 months. The fair value of the equipment on the date of sale was $100,000. The amount of revenue to be recognized on this transaction in 2024 is a. $110, 000 b. $10,000 c. $100,000 d. $105,833 is it c or d
At the end of its financial year, Tanner Co had the following non-current assets: Land and buildings at cost $10.4 million Land and buildings: accumulated depreciation $0.12 million Tanner Co decided to revalue its land and buildings at the year-end to $15 million. What will be the value of the revaluation surplus if the revaluation is accounted for? %24
The owners of a company are planning to sell the business to new interests. The cumulative net earnings for the past 4 years were P6,000,000 including casualty loss of P200,000. The current value of net assets of the company was P16,000,000. Goodwill is determined by capitalizing average earnings at 8%. What is the amount of goodwill? a. P1.450.000 b. P1.550.000 c. P2,215.000 d. P3.375.000
Bayelsa Corp. had the following transactions in the current year: Short term capital gain Short term capital loss Long term capital gain Long term capital loss If Bayelsa has taxable income of $70,000 before considering the capital transactions, what is Bayelsa's net capital loss that cannot be deducted in the current year? O SO $12,000 -$3,000 $5,000 -$16,000 O $19,000 net capital loss O $11,000 net capital loss O $2,000 net capital loss
Book value and taxes on sale of assets Troy Industries purchased a new machine 4 year(s) ago for $80,000. It is being depreciated under MACRS with a 5-year recovery period using the schedule. Assume 21% ordinary and capital gains tax rates. a. What is the book value of the machine? b. Calculate the firm's tax liability if it sold the machine for each of the following amounts: $96,000; $56,000; $13,600; and $9,500. a. The remaining book value is $ (Round to the nearest dollar.) ...
Manji