Question

Louvre Inc. bought a business that is expected to give a 25% annual rate of return on the investment. Of the total amount paid for the business, $75,000 was deemed to be goodwill, and the rest was attributed to the identifiable net assets. Louvre Inc. estimated that the annual future earnings of the new business would be equal to the average ordinary earnings per year of the business over the past three years. The total net income over the past three years was $375,000. This amount included a loss on discontinued operations of $25,000 in one year and an unusual and non-recurring gain of $95,000 in one of the other two years.
Instructions
Calculate the fair value of the identifiable net assets that Louvre Inc. purchased in this transaction.


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  • CreatedSeptember 18, 2015
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