Question: In addition to the information provided in P2 9 you also

In addition to the information provided in P2-9, you also learn the following about Louis' assets:
i. Louis thinks that if he closed his practice he could sell his list of patients to another dentist for $125,000.
ii. If Louis tried to sell his equipment he would receive about $25,000.
iii. Louis would be unlikely to receive any money if he tried to sell the furniture and decorations.

a. Use the additional information along with the information in P2-9 to prepare a re vised personal balance sheet for Louis' dental practice. Explain the choices you made in preparing the statement.
b. Compare your balance sheet with the one you prepared in P2-9. Which do you think would be more useful for valuing Louis' practice? Explain.
c. What problems arise when using market values of Louis' assets instead of the cost? What are some of the benefits of using the cost of the assets? Is the balance sheet prepared using market value information more or less useful than the balance sheet prepared using the cost information?

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  • CreatedFebruary 26, 2015
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