Problem 19-29 (Algorithmic) (LO. 3) At her death, Chow owned 55% of the stock in Finch Corporation, with the balance held by family members. In the past five years, Finch has earned average net profits of $1,950,000, and on the date of Chow's death, the book value of its stock is $4,875,000. An appropriate rate of return for Finch's business is in is 6.95%. If required, round your intermediate computations to the nearest dollar. a. If goodwill exists, the total value of Finch stock is What value would the IRS argue that the stock Chow owned should be included in her estate? b. Considering the facts given, identify some factors that could be present to reduce the value of such goodwill by selecting "Yes" for ones that can impact a goodwill valuation and "No" for ones that won't. 1. Extraordinary gains. 2. Lower than industry average salaries. 3. Chow was the key person in the success of the business. 4. The appropriate rate of return for this type of business is low.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
Problem 19-29 (Algorithmic) (LO. 3)
At her death, Chow owned 55% of the stock in Finch Corporation, with the balance held by family members. In the past five years, Finch
has earned average net profits of $1,950,000, and on the date of Chow's death, the book value of its stock is $4,875,000. An appropriate
rate of return for Finch's business is in is 6.95%.
If required, round your intermediate computations to the nearest dollar.
a. If goodwill exists, the total value of Finch stock is $
What value would the IRS argue that the stock Chow owned should be included in her estate?
b. Considering the facts given, identify some factors that could be present to reduce the value of such goodwill by selecting "Yes" for ones
that can impact a goodwill valuation and "No" for ones that won't.
1. Extraordinary gains.
2. Lower than industry average salaries.
3.
Chow was the key person in the success of the business,
4.
The appropriate rate of return for this type of business is low.
Transcribed Image Text:Problem 19-29 (Algorithmic) (LO. 3) At her death, Chow owned 55% of the stock in Finch Corporation, with the balance held by family members. In the past five years, Finch has earned average net profits of $1,950,000, and on the date of Chow's death, the book value of its stock is $4,875,000. An appropriate rate of return for Finch's business is in is 6.95%. If required, round your intermediate computations to the nearest dollar. a. If goodwill exists, the total value of Finch stock is $ What value would the IRS argue that the stock Chow owned should be included in her estate? b. Considering the facts given, identify some factors that could be present to reduce the value of such goodwill by selecting "Yes" for ones that can impact a goodwill valuation and "No" for ones that won't. 1. Extraordinary gains. 2. Lower than industry average salaries. 3. Chow was the key person in the success of the business, 4. The appropriate rate of return for this type of business is low.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Corporate Distributions and Adjustments
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
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education