What amount should be recorded as acquisition cost of ABC Company? a. 2,535,000 b. 2,100,000 c. 2,315,000 d. 2,305,000
Topic: Intangible Assets (
Sarrah Company is interested in computing the goodwill to be recognized in the purchase of ABC Company in January 2022. The following information was taken from the records of ABC Company:
Net Income Net Assets
2017 360,000 1,600,000
2018 388,000 1,800,000
2019 288,000 1,900,000
2020 380,000 2,000,000
2021 394,000 2,100,000
1,810,000 9,400,000
Goodwill is measured by capitalizing excess earnings at 40% with normal return on average net assets at 10%.
What amount should be recorded as acquisition cost of ABC Company?
a. 2,535,000
b. 2,100,000
c. 2,315,000
d. 2,305,000
Step by step
Solved in 2 steps
