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Botiating to acquire Het assets öf Magenta Company. Purple is willing to pay goodwill computed by capitalizing at 25% Magenta's average earnings in excess of the 10% normal rete pased on appraised value of net assets. Magenta's income for the past three years average P3,000,00 Magenta's assets and liabilities are: Book value Assets, excluding goodwill Liabilities P30,000,000 10,500,000 Appraised value P39,000,000 10,500,000 Shat is the amount of goodwill?

Botiating to acquire Het assets öf Magenta Company. Purple is willing to pay goodwill computed by capitalizing at 25% Magenta's average earnings in excess of the 10% normal rete pased on appraised value of net assets. Magenta's income for the past three years average P3,000,00 Magenta's assets and liabilities are: Book value Assets, excluding goodwill Liabilities P30,000,000 10,500,000 Appraised value P39,000,000 10,500,000 Shat is the amount of goodwill?

FINANCIAL ACCOUNTING
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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6. Purple Company is negotiating to acquire the net assets of Magenta Company. Purple is willing to pay for goodwill computed by capitalizing at 25% Magenta's average earnings in excess of the 10% normal return based on appraised value of net assets. Magenta's income for the past three years average P3,000,000. Magenta's assets and liabilities are: Appraised value P39,000,000 10,500,000 Book value Assets, excluding goodwill P30,000,000 Liabilities 10,500,000 What is the amount of goodwill? Solution
Transcribed Image Text:6. Purple Company is negotiating to acquire the net assets of Magenta Company. Purple is willing to pay for goodwill computed by capitalizing at 25% Magenta's average earnings in excess of the 10% normal return based on appraised value of net assets. Magenta's income for the past three years average P3,000,000. Magenta's assets and liabilities are: Appraised value P39,000,000 10,500,000 Book value Assets, excluding goodwill P30,000,000 Liabilities 10,500,000 What is the amount of goodwill? Solution
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