Goodwill of a firm is to be valued at two years' purchase of three years' average profits. The profits of the last three years were: 2000 - RO 30,000, 2001 -RO. 40,000 and 2002 - RO.35,000. Calculate the amount of goodwill.

Goodwill of a firm is to be valued at two years' purchase of three years' average profits. The profits of the last three years were: 2000 - RO 30,000, 2001 -RO. 40,000 and 2002 - RO.35,000. Calculate the amount of goodwill.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Upper Division of Lower Company acquired an asset with a cost of $645,000 and a four-year life. The…

A: The money that the business entity makes after deducting its capital costs is referred to as…

Q: An instrument requires recalibration once every five years at a his expense, assuming i = 5%.

A: Capitalized cost is the present value of the future cost that are going to occur based on the time…

Q: A company completed development of a product on 31 December 20X0. The development cost was £100…

A: Capitalized expenses are those one time expenses that are already incurred in the past and they are…

Q: The ____________ is multiplied by a certain number of years to arrive at the value of goodwill.

A: Goodwill means the reputation which a firm enjoy because any factor like good after sale service ,…

Q: The initial cost of a project is 1000 monetary units, its useful life is 5 years and the scrap value…

A: Gross income can be defined as the difference between the revenues earned by selling the product and…

Q: Upper Division of Lower Company acquired an asset with a cost of $620,000 and a four-year life. The…

A: Working Note #1 Cost of assets will increase by 10% every year Year Cost of Assets(Formula)…

Q: If a commercial real estate asset had produced an annual cash flow of $325,000 in Year 1 and…

A: Calculation of changes in the value at the end of year 2. Working notes:- Formula used: Value of…

Q: Upper Division of Lower Company acquired an asset with a cost of $560,000 and a four-year life. The…

A: ROI is called as return on investment. It is the ratio of net income to average investment.…

Q: On January 1, a company invested in an asset with a useful life of 3 years. The company’s expected…

A: Let CFn be the cashflow in year n. CF1 = $8000 CF2 = $9000 CF3 = $10000 r = 10% Present value factor…

Q: In 2018 an asset was purchased for $2,000,000. The asset qualified for Initial Allowance. The…

A: The initial allowance is an allowance given in the tax code for qualifying assets in the first year…

Q: The Fancy Manufacturing Company is considering a new investment. Financial projections for the…

A: The net income will be found after deducting taxes from the amount that is taxable. The taxable…

Q: How do you calculate the goodwill value of $94,700?

A: Lets understand the basics.When one entity acquires another entity then concept of goodwill or gain…

Q: 6. If a building with a 40-year economic life is being depreciated at the rate of 2.5 percent per…

A: Depreciation is a accounting method which is charge on cost of a tangible asset is spread over the…

Q: Calculate goodwill at three year purchase of the average profits of last five years’ profits. The…

A: To calculate goodwill at three year purchase of the average profits of last five years’ profits:-…

Q: what is the intrinsic value of the asset after accounting for the cost of illiquidity?

A: Given in the question: Purchase price of the asset = P1,200,000 The value of the asset has been…

Q: A machinery worth BD20,000 has a lifetime of10 years and a salvage value of Rs. 1500. Calculate the…

A: Using the sinking fund method: Accumulated Depreciation=BD 12,584.21272 Book value at the end of…

Q: The Goodwill is to be valued at two years' purchase of last four years' average profit. The profits…

A: Average profit of 4 years = (40,000 + 32,000 + 15,000 + 13,000)/4 = 25,000

Q: d. All of the above 6. If current assets are P270,000 and total assets are P810,000, what percentage…

A: Percentage of total assets are current assets = Current assets / Total assets

Q: worth 9% compounded annually, what was she equivalent uniform annual cost for the ten- year period?

A: Equivalent Uniform Annual Cost: It is the cost of operating, maintaining, and owning the asset…

Q: ind out the value of

A: Goodwill when the purchasing company pays a price higher that the net fair value of the assets of…

Q: 2nd year by adjusting the gross amount of PPE in proportion to the valuation. What would be the…

A: As per IFRS, there are two approaches of revaluation of Asset: (1) Depreciation Elimination Approach…

Q: For years one through five, a proposed expenditure of £350,000 on a non- current asset with an…

A: Answer:- Payback period meaning:- The payback period can be defined as the amount of time which is…

Q: 10. A small business with an initial investment of ETB. 12,000 earns a profit of ETB 10,000 during…

A: Initial Investment = ETB 12,000 Profit for 1st year = ETB 10,000 Profit for 2nd year to 10th year =…

Q: certain machine the following were spent for its During the first 10 years of the life of…

A: Year (1) Cashflows (2) PV factor / annuity factor @7% (3) Discounted Cashflows (4) = (2)*(3)…

Q: What is the depreciation deduction each year, using each of the methods below, for an asset that…

A: Depreciation is the reduction in the value of assets due to normal wear and tear, passage of time,…

Q: Consider an asset with upfront cost of $46,184. The cost associated with it during the first year of…

A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…

Q: (b) Calculate the capital porpetuily where the ap

A: Capital value is the equivalent value based on time and interest rate of the future cash flow that…

Q: 24) Calculate goodwill at three year purchase of the average profits of last five years profits. The…

A: Step 1: Average 5 Years profit Average 5 years profit (23000+27000+32000+20000+18000)/5…

Q: The following details relate to M/s XYZ, a firm: Average profit of last four years = $7,00,000…

A: Value of goodwill on the basis of annuity of super profit = $4,75,485Explanation:Step 1:Computation…

Q: A company has purchased an asset for $188,341. If they require a return of 12.78%, how much must…

A: Value of asset after 6 years will be calculated using Future Value formula. Future value = Present…

Q: 1)The profits of the last five years were: OMR 32,500, OMR 25,500, OMR 32,000,

A: Formula: Average profits = Sum of years Profits / Number of years

Q: 26). from the following facts,for the sum of years digits what is given: cost : $15,000 residual…

A: Cost = $15,000 Residual Value = $4000 Years =4 Yearly Depreciation for year 3 Remaining Years =2…

Q: from the following facts,for the sum of years digits what is given: cost : $15,000 residual value…

A: Cost : $15,000 Residual value : $4000 Useful life: 4 years

Q: 2018 an asset was purchased for $2,000,000. Initial Allowance (IA) Rate was 20%. Annual Allowance…

A: Step 1: Calculate Initial AllowanceInitial Allowance Rate = 20% Purchase Price = $2,000,000Initial…

Q: A business buys a machine for £60,000 and depreciates it at 10% per annum by the reducing…

A: We have the following information: Cost of Machine: $60,000 Rate of depreciation: 10% per annum…

Q: using a capitalization of 10% a commercial property is valued at 420000. the expenses are 30% of the…

A: Capitalization rate = 10% Property Value = 420,000 Expenses = 30% of gross income

Q: A car which was bought for Ghc 9,000 when new was valued at Ghc Ghc7, 500 at the end of the first…

A: Given that, cost of the car = Ghc 9000 value of the car at the end of the year 1 = Ghc 7500 rate of…

Q: Rework previous parts assuming they are annuities due. Present value of $800 per year for 14 years…

A: Annuities due are referred to as that annuity whose payment is due immediately at the beginning of…

Q: A non-current asset costing €2,000 was acquired at the start of year 1. It is being depreciated…

A: The accounting income i.e., the profit as per the income statement and the taxable income i.e., the…

Question

2. Goodwill of a firm is to be valued at two years' purchase of three years' average profits. The profits of the last three years were: 2000 - RO 30,000, 2001 -RO. 40,000 and 2002 - RO.35,000. Calculate the amount of goodwill.

Definition Definition Intangible asset that includes proprietary or intellectual property and brand value of a firm. Goodwill is recorded in the books when a firm purchases another firm and the purchase price is more than the fair value of net identifiable assets of the acquired business. The amount of goodwill is recorded on the asset side of the balance sheet (statement of financial position).

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Calculate the capitalized cost of an equipment maintained at a rate of 6% every year for $10,000, replaced every 3years for $25,000 at the same rate, and bought for $110,500.
5. A given item has a spelling price of $1,000. Its value depreciates at a rate of 12% per annum. What will be its selling price after 6 years? Tabulate the annual depreciation amounts and the book value of the equipment at the end of each year.
The asset - vehicle worth £21,200 will be depreciated by 10% at the end of the year. Which nominal accounts should be debited and credited, respectively? a) Debit Depreciation A/c & Credit Non-Current Asset A/c b) Debit Inventory A/c & Credit Depreciation A/c c) Debit Balance Sheet A/c & Credit Profit or Loss A/c
3. A company needs 5.3 years in order to recover all the cost of their investment. $4.9M is the annual profit and 5.5% of the total investment is the annual depreciation. Determine the total investment of the company.
The company Alumnos Emprendedores S.A. has an investment for a total amountof $175,800.00, and annual net cash flows of $52,050.00, calculate the periodof recovery, detail your result in years, months and days
$500,000 was invested in depreciable property to obtain before-tax annual revenues of $108,333.33 each of the following 9 years and $158,333.33 the 10 year. Now suppose the expenditure is on a consulting study that identifies cost-saving opportunities that will produce the same BTCF. With a 25% income-tax rate and an after-tax MARR of 10%, what will be the after-tax measures of economic worth for the investment?
A firm has invested $50,000 in equipment with a 5-year useful life. The machinery will have a salvage value of $5,000. The annual benefits from the machinery are $13,000 for the first year and increase by $2,000 per year. Assume a combined 30% income tax rate, and the firm uses the SOYD depreciation. Calculate the before-tax IRR. Calculate the after-tax IRR.
10. A small business with an initial investment of ETB. 12,000 earns a profit of ETB 10,000 during the first year of its operation and the profit increases by ETB. 1,000 from its second year of operation up to its 10th year of operation. At the end of the life of the business, the salvage value is zero. Find the present worth of the business by assuming an interest rate of 18%, compounded annually.
Funds committed to a project of Triumph Ltd. are Rs.25 lakh. The inflows relating to the project for the six years areRs.7,50,000; Rs.8,00,000; Rs.6,50,000; Rs.6,00,000; Rs.5,50,000 and Rs.4,50,000 respectively; compute the IRR of theproject and unrecovered investment balance at the end of year 4.
(Capitalisation of super profits). A firm having the assets of $ 5,00,000 and liabilities of $ 2,10,000 earns the annual profits of $ 45,000. The rate of normal profit being 15%. Calculate the amount of Goodwill by capitalisation of super profits method.