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Business
Accounting
$ Amount 50,000 250,000 300,000 500,000 Assets Cash Accounts receivable Inventory Building $600,000 Less: Accumulated depreciation $100,000 Goodwill 300,000 1,400,000 Total Assets Liabilities Accounts payable Income tax payable Bank loan 70,000 30,000 800,000 900,000 Total liabilities A review of the business operations shows that building was bought 4 years ago and is reported at carrying amount of $500,000, the current market value of the building is $1,000,000. Inspection of inventory reveals that 10% of the inventory is obsolete, for which there is limited demand. Further 12% of the accounts receivable is overdue by more than 120 days. The accounts receivable and inventory are carried at their gross amount and cost value respectively on the financial statements. A review of Income statement reveals that business has not provided for any bad debt expense and

$ Amount 50,000 250,000 300,000 500,000 Assets Cash Accounts receivable Inventory Building $600,000 Less: Accumulated depreciation $100,000 Goodwill 300,000 1,400,000 Total Assets Liabilities Accounts payable Income tax payable Bank loan 70,000 30,000 800,000 900,000 Total liabilities A review of the business operations shows that building was bought 4 years ago and is reported at carrying amount of $500,000, the current market value of the building is $1,000,000. Inspection of inventory reveals that 10% of the inventory is obsolete, for which there is limited demand. Further 12% of the accounts receivable is overdue by more than 120 days. The accounts receivable and inventory are carried at their gross amount and cost value respectively on the financial statements. A review of Income statement reveals that business has not provided for any bad debt expense and

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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In the image attached, a balance sheet of company is provided. Suppose mr . R wants to acquire this business and he believes that the business is worth $550 000. With reference to the different measurement's methods in accounting, advise on the appropriateness of this assessment.

 

Demonstrates a thorough understanding and knowledge of how the worth of a business is determined and explain the measurement basis that can result he will need to provide. 

$ Amount 50,000 250,000 Assets Cash Accounts receivable Inventory Building $600,000 300,000 500,000 Less: Accumulated depreciation $100,000 Goodwill 300,000 Total Assets | 1,400,000 Liabilities 70,000 30,000 800,000 900,000 Accounts payable Income tax payable Bank loan Total liabilities A review of the business operations shows that building was bought 4 years ago and is reported at carrying amount of $500,000, the current market value of the building is $1,000,000. Inspection of inventory reveals that 10% of the inventory is obsolete, for which there is limited demand. Further 12% of the accounts receivable is overdue by more than 120 days. The accounts receivable and inventory are carried at their gross amount and cost value respectively on the financial statements. A review of Income statement reveals that business has not provided for any bad debt expense and upward prevision of inventory.
Transcribed Image Text:$ Amount 50,000 250,000 Assets Cash Accounts receivable Inventory Building $600,000 300,000 500,000 Less: Accumulated depreciation $100,000 Goodwill 300,000 Total Assets | 1,400,000 Liabilities 70,000 30,000 800,000 900,000 Accounts payable Income tax payable Bank loan Total liabilities A review of the business operations shows that building was bought 4 years ago and is reported at carrying amount of $500,000, the current market value of the building is $1,000,000. Inspection of inventory reveals that 10% of the inventory is obsolete, for which there is limited demand. Further 12% of the accounts receivable is overdue by more than 120 days. The accounts receivable and inventory are carried at their gross amount and cost value respectively on the financial statements. A review of Income statement reveals that business has not provided for any bad debt expense and upward prevision of inventory.
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