Frappe Company is acquiring Frappuccino Corporation on January 1, 2020. The cumulative earnings of Frappuccino from 2015 to 2019 amounted to P7,200,000. On January 1, 2020, the assets and liabilities of Frappuccino at appraised values are P10,350,000 and P6,650,000, respectively. The normal return in Frappuccino 's industry is 20%. Goodwill is computed by capitalizing at 25% average earnings in excess of normal return based on appraised value of net assets. What is the amount paid by Frappe in the acquisition of Frappuccino Corporation?
Frappe Company is acquiring Frappuccino Corporation on January 1, 2020. The cumulative earnings of Frappuccino from 2015 to 2019 amounted to P7,200,000. On January 1, 2020, the assets and liabilities of Frappuccino at appraised values are P10,350,000 and P6,650,000, respectively. The normal return in Frappuccino 's industry is 20%. Goodwill is computed by capitalizing at 25% average earnings in excess of normal return based on appraised value of net assets. What is the amount paid by Frappe in the acquisition of Frappuccino Corporation?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Frappe Company is acquiring Frappuccino Corporation on January 1, 2020. The
cumulative earnings of Frappuccino from 2015 to 2019 amounted to P7,200,000. On
January 1, 2020, the assets and liabilities of Frappuccino at appraised values are
P10,350,000 and P6,650,000, respectively. The normal return in Frappuccino
's industry
is 20%. Goodwill is computed by capitalizing at 25% average earnings in excess of normal
return based on appraised value of net assets.
What is the amount paid by Frappe in the acquisition of Frappuccino Corporation?
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