Answered: TRUE or FALSE 1. If an equipment…

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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Blossom Company is considering the acquisition of Splish, Inc. To assess the amount it might be willing to pay, Blossom makes the following computations and assumptions. A. Splish, Inc. has identifiable assets with a total fair value of $6,014,000 and liabilities of $3,728,000. The assets include office equipment with a fair value approximating book value, buildings with a fair value 25% higher than book value, and land with a fair value 50% higher than book value. The remaining lives of the assets are deemed to be approximately equal to those used by Splish, Inc. B. Splish, Inc's pretax incomes for the years 2020 through 2022 were $470,600, $572,300, and $371,100, respectively. Blossom 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 for the following items included in pretax earnings: Depreciation on Buildings (each year) 384,800 Depreciation on Equipment (each year) 31,100…
Option 1 - A company is currently paying its employees $0.38 per kilometre to drive their own cars on company business. Option 2 - The company is considering supplying employees with cars, which would involve purchasing at $25000, with an estimated three year life, a net salvage value of $8000, taxes and insurance at a cost of $900 per year, and operating and maintenance expenses of $0.22 per kilometre. If the interest rate is 10% and the company anticipates an employee's annual travel to be 22,000 kilometres, answer the following questions: (Keep 2 decimal places) The equivalent cost per km for Option 2 is $ The equivalent cost per km for Option 1 is $ The cheaper option for the company is

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