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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Subject: AFAR #185
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