Winds Inc. originally has four branches. The North Branch was already sold due to downsizing reasons and the South Branch would also be sold soon. Due to a lack of market value information and high cost of valuation, Winds would like to use the price to book value ratio of the North Branch to value the South Branch. The North Branch has books values of P2,000,000 for assets and P800,000 for liability. The net proceeds from the sale and closure was only P1,050,000. The accounting books of the South branch show P1,900,000 in assets and P750,000 in liabilities. Based on the given, which of the following statements is FALSE? a. if the South Branch is sold exactly at the computed relative value based ; on the North Branch, the former will be sold for net proceeds less than the net proceeds of the North Branch. b. The relative value of the south branch is P1,314,285.71 c. The price to book value ratio of the north branch is P0.875 d. If the South branch is sold exactly at the computed relative value based on the North Branch, then Winds Inc will incur a loss on sale.
Winds Inc. originally has four branches. The North Branch was already sold due to
downsizing reasons and the South Branch would also be sold soon. Due to a lack of
market value information and high cost of valuation, Winds would like to use the price to
book value ratio of the North Branch to value the South Branch. The North Branch has
books values of P2,000,000 for assets and P800,000 for liability. The net proceeds from
the sale and closure was only P1,050,000. The accounting books of the South branch show
P1,900,000 in assets and P750,000 in liabilities. Based on the given, which of the
following statements is FALSE?
a. if the South Branch is sold exactly at the computed relative value based ; on the North Branch, the former will be sold for net proceeds less than the net proceeds of the North Branch.
b. The relative value of the south branch is P1,314,285.71
c. The price to book value ratio of the north branch is P0.875
d. If the South branch is sold exactly at the computed relative value based on the North Branch, then Winds Inc will incur a loss on sale.
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