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Sarah states the business is worth more than $50 000 since the car and equipment cost a total of $88 000. a. What is the owner's equity in this business? Show your work. b. What is the book value of the van and equipment? Show your worknrk. c. What do you think is a fair selling price based only on the figures provided? What two other pieces of information would you like to see to help you determine afair selling price? A

Sarah states the business is worth more than $50 000 since the car and equipment cost a total of $88 000. a. What is the owner's equity in this business? Show your work. b. What is the book value of the van and equipment? Show your worknrk. c. What do you think is a fair selling price based only on the figures provided? What two other pieces of information would you like to see to help you determine afair selling price? A

FINANCIAL ACCOUNTING
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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Sarah Lin owns a business. She decides to sell the business and offers it to you for $50 000 cash. You will own all the assets and liabilities. Lin provides the following information: Assets Debit Credit Cash $4 000 Accounts Receivable 3 500 Supplies 3 000 Equipment 50 000 Accumulated Depreciation-Equipment Delivery Van Accumulated Depreciation-Van $24 400 38 000 24 966 Liabilities Accounts Payable Bank Loan (1 year) 5 000 12 000 Sarah states the business is worth more than $50 000 since the car and equipment cost a total of $88 000. a. What is the owner's equity in this business? Show your work. b. What is the book value of the van and equipment? Show your workark. c. What do you think is a fair selling price based only on the figures provided? What two other pieces of information would you like to see to help you determine a fair selling price? d
Transcribed Image Text:Sarah Lin owns a business. She decides to sell the business and offers it to you for $50 000 cash. You will own all the assets and liabilities. Lin provides the following information: Assets Debit Credit Cash $4 000 Accounts Receivable 3 500 Supplies 3 000 Equipment 50 000 Accumulated Depreciation-Equipment Delivery Van Accumulated Depreciation-Van $24 400 38 000 24 966 Liabilities Accounts Payable Bank Loan (1 year) 5 000 12 000 Sarah states the business is worth more than $50 000 since the car and equipment cost a total of $88 000. a. What is the owner's equity in this business? Show your work. b. What is the book value of the van and equipment? Show your workark. c. What do you think is a fair selling price based only on the figures provided? What two other pieces of information would you like to see to help you determine a fair selling price? d
The revenue and expense accounts of Branchly. Enterprises are shown below: Revenue Year 1 100 000 Expenses Year 1 65 000 Financial statements were prepared at the end of the fiscal period. The net income was $35 000. The accountant quit after preparing the statements and a new accountant began work in the new.xear. At the end of the second year, the accounts appear as summarized below: Revenue Year 1 100 000 Year 2 140 000 Total 240000 Expenses Year 1 65 000 Year 2 90 000 Total 155000 Financial statements prepared at the end of the second year indicated a net income of $85 000. The owner thought this was too good to be true. The owner was right! a. Why is the $85 000 net income figure incorrect? .d b. What is the correct net income for the second year? Show your work-
Transcribed Image Text:The revenue and expense accounts of Branchly. Enterprises are shown below: Revenue Year 1 100 000 Expenses Year 1 65 000 Financial statements were prepared at the end of the fiscal period. The net income was $35 000. The accountant quit after preparing the statements and a new accountant began work in the new.xear. At the end of the second year, the accounts appear as summarized below: Revenue Year 1 100 000 Year 2 140 000 Total 240000 Expenses Year 1 65 000 Year 2 90 000 Total 155000 Financial statements prepared at the end of the second year indicated a net income of $85 000. The owner thought this was too good to be true. The owner was right! a. Why is the $85 000 net income figure incorrect? .d b. What is the correct net income for the second year? Show your work-
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