excess earnings discounted at 10% for four years with normalrate at 8%. The present value of an ordinary annuity of 1 for 4c. Goodwill is measured at the present value of the averageCompute the goodwill under the following methods:amortization of the patent cost.Problem 33-4 (IAA)Meek Company is considering the acquisition of another entity.The following data relate to the acquiree:Shareholders' equityEarnings for prior three years5,000,0001,500,000The acquiree has a valuable patent which is not recorded. Ifthe entity is sold, the patent would be transferred to the buyerfor P500,000. Other assets are properly appraised. The patenthas a remaining life of 5 years. The earnings of the entity areexpected to increase 10% more than the average earnings ofthe past three years before taking into consideration theRequired:Compute the goodwill under the following methods:* Average future earnings are capitalized at 8%.* Goodwill is measured at the average excess earningscapitalized at 10% with normal rate at 8%.* Goodwill is measured at the present value of the averagea.

Goodwill: It is the reputation of the business valued in terms of money. It is the extra money paid…

Answered: Problem 33-4 (IAA) Meek Company is…

Problem 33-4 (IAA) Meek Company is considering the acquisition of another entit The following data relate to the acquiree: Shareholders' equity Earnings for prior three years 5,000,000 1. 500.000

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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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

excess earnings discounted at 10% for four years with normal
rate at 8%. The present value of an ordinary annuity of 1 for 4
c. Goodwill is measured at the present value of the average
Compute the goodwill under the following methods:
amortization of the patent cost.
Problem 33-4 (IAA)
Meek Company is considering the acquisition of another entity.
The following data relate to the acquiree:
Shareholders' equity
Earnings for prior three years
5,000,000
1,500,000
The acquiree has a valuable patent which is not recorded. If
the entity is sold, the patent would be transferred to the buyer
for P500,000. Other assets are properly appraised. The patent
has a remaining life of 5 years. The earnings of the entity are
expected to increase 10% more than the average earnings of
the past three years before taking into consideration the
Required:
Compute the goodwill under the following methods:
* Average future earnings are capitalized at 8%.
* Goodwill is measured at the average excess earnings
capitalized at 10% with normal rate at 8%.
* Goodwill is measured at the present value of the average
a.

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