Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Chapter 1, Problem 1A.1.2AE
To determine
Introduction: Acquisition is a corporate term used to represent purchase of another company and gaining the ownership of the company.
To Estimate: The value of
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Blue Company owns a trade name that was purchased in an acquisition of McClellan Company. The trade name has a book value of
$3,500,000, but according to GAAP, it is assessed for impairment on an annual basis. To perform this impairment test, Blue must
estimate the fair value of the trade name. It has developed the following cash flow estimates related to the trade name based on
internal information. Each cash flow estimate reflects Blue's estimate of annual cash flows over the next 9 years. The trade name is
assumed to have no salvage value after the 9 years. (Assume the cash flows occur at the end of each year.)
Cash Flow Estimate
$382.500
646,400
769,700
Probability Assessment
Click here to view factor tables.
Estimated fair value
20%
$
50%
(a) What is the estimated fair value of the trade name? Blue determines that the appropriate discount rate for this estimation is 9%.
(Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 458,581.)
30%
Carla Company owns a trade name that was purchased in an acquisition of McClellan Company. The trade name has a book value of
$3,500,000, but according to GAAP, it is assessed for impairment on an annual basis. To perform this impairment test, Carla must
estimate the fair value of the trade name. It has developed the following cash flow estimates related to the trade name based on
internal information. Each cash flow estimate reflects Carla's estimate of annual cash flows over the next 9 years. The trade name is
assumed to have no salvage value after the 9 years. (Assume the cash flows occur at the end of each year.)
Cash Flow
Estimate
$381,100
649,200
759,600
Probability Assessment
Click here to view factor tables
20%
50%
30%
(a) What is the estimated fair value of the trade name? Carla determines that the appropriate discount rate for this estimation is 9%.
(Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 458,581.)
Ripley corporarion's accumulated depreciation - equipment account increased by 15325 while 3800 of patent amortization was recognized bewtween balance sheet dates. There were no purchases of sales of depreciation or intangible assets during the year. In addition the income statement showed a gain of 22420 from the salem of investments. Reconcile a net income of 286900 to net cash flow from operetatimg activities
Chapter 1 Solutions
Advanced Accounting
Ch. 1 - Prob. 1UTICh. 1 - Prob. 3UTICh. 1 - Prob. 4UTICh. 1 - Prob. 5UTICh. 1 - Prob. 6UTICh. 1 - Prob. 7UTICh. 1 - Prob. 8UTICh. 1 - Prob. 9UTICh. 1 - Prob. 10UTICh. 1 - Prob. 1.1E
Ch. 1 - Prob. 1.2ECh. 1 - Prob. 1.3ECh. 1 - Prob. 2ECh. 1 - Prob. 5.1ECh. 1 - Prob. 5.2ECh. 1 - Prob. 6ECh. 1 - Lake craft Company has the following balance...Ch. 1 - Prob. 8.2ECh. 1 - Prob. 8.3ECh. 1 - Prob. 9.1ECh. 1 - Prob. 9.2ECh. 1 - Prob. 1A.1.1AECh. 1 - Prob. 1A.1.2AECh. 1 - Prob. 1.2PCh. 1 - Prob. 1.3.1PCh. 1 - Prob. 1.4PCh. 1 - Jack Company is a Corporation that was organized...Ch. 1 - Prob. 1.6PCh. 1 - Prob. 1.7.1PCh. 1 - Prob. 1.7.2PCh. 1 - Prob. 1.8PCh. 1 - Prob. 1.10.A1PCh. 1 - Prob. 1.11PCh. 1 - Prob. 1.12PCh. 1 - Prob. 1.13.2PCh. 1 - Prob. 1A.1.1APCh. 1 - Prob. 1A.1.2APCh. 1 - (Note: The use 01 a financial calculator or Excel...Ch. 1 - Frontier does not have publicly traded stock. You...Ch. 1 - Frontier does not have publicly traded stock. You...Ch. 1 - Prob. 1.1B.3CCh. 1 - Prob. 1.1CCCh. 1 - Prob. 1.2.1CCh. 1 - Prob. 1.2.2CCh. 1 - Case 1-2 Disney Acquires Marvel Entertainment On...
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