Don't give answer in image format Crane Homes Company is considering the acquisition of Novak, Inc. early in 2025. To assess the amount, it might be willing to pay,Crane Homes makes the following computations and assumptions.AB.С(a)Novak, Inc. has identifiable assets with a total fair value of $15,017,000 and liabilities of $8,822,000. The assets includeoffice equipment with a fair value approximating book value, buildings with a fair value 30% higher than book value, and landwith a fair value 75% higher than book value. The remaining lives of the assets are deemed to be approximately equal tothose used by Novak, Inc.Novak, Inc.'s pretax incomes for the years 2022 through 2024 were $1,200,800, $1,501,600, and $954,000, respectively.Crane Homes believes that an average of these earnings represents a fair estimate of annual earnings for the indefinitefuture. However, it may need to consider adjustments to the following items included in pretax earnings:Depreciation on buildings (each year)Depreciation on equipment (each year)Extraordinary loss (year 2024)Sales commissions (each year)The normal rate of return on net assets for the industry is 15%.(b)Assume further that Crane Homes feels that it must earn a 25% return on its investment and that goodwill is determined bycapitalizing excess earnings. Based on these assumptions, calculate a reasonable offering price for Novak, Inc. Indicate how muchof the price consists of goodwill. Ignore tax effects. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and finalanswers to O decimal places e.g. 58,971.)GoodwillOffering priceSave for LaterGoodwill$Offering price$Assume that Crane Homes feels that it must earn a 15% return on its investment, but that average excess earnings are to becapitalized for three years only. Based on these assumptions, calculate a reasonable offering price for Novak, Inc. Indicate howmuch of the price consists of goodwill. Ignore tax effects. (Round present value factor calculations to 5 decimal places, e.g. 1.25124and final answers to O decimal places e.g. 58,971.)964,40053,800302,700252,200$$Attempts: 0 of 2 used Submit Answer

Answer:- Goodwill :- Intangible asset that includes proprietary or intellectual property and brand…

sidering the Crane Homes makes the following computations and assumptions. A B. ovak, Inc. early in 2025. 10 sess the amount, it might be willing to pay. Novak, Inc. has identifiable assets with a total fair value of $15,017,000 and liabilities of $8,822,000. The assets include office equipment with a fair value approximating book value, buildings with a fair value 30% higher than book value, and land with a fair value 75% higher than book value. The remaining lives of the assets are deemed to be approximately equal to those used by Novak, Inc. Novak, Inc's pretax incomes for the years 2022 through 2024 were $1,200,800, $1,501,600, and $954,000, respectively. Crane Homes believes that an average of these earnings represents a fair estimate of annual earnings for the indefinite future. However, it may need to consider adjustments to the following items included in pretax earnings: Depreciation on buildings (each year) Depreciation on equipment (each year) Extraordiososlore lu 20211 964,400 53,800 202 700

sidering the Crane Homes makes the following computations and assumptions. A B. ovak, Inc. early in 2025. 10 sess the amount, it might be willing to pay. Novak, Inc. has identifiable assets with a total fair value of $15,017,000 and liabilities of $8,822,000. The assets include office equipment with a fair value approximating book value, buildings with a fair value 30% higher than book value, and land with a fair value 75% higher than book value. The remaining lives of the assets are deemed to be approximately equal to those used by Novak, Inc. Novak, Inc's pretax incomes for the years 2022 through 2024 were $1,200,800, $1,501,600, and $954,000, respectively. Crane Homes believes that an average of these earnings represents a fair estimate of annual earnings for the indefinite future. However, it may need to consider adjustments to the following items included in pretax earnings: Depreciation on buildings (each year) Depreciation on equipment (each year) Extraordiososlore lu 20211 964,400 53,800 202 700

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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