Question

Rotterdam Corporation's pre-tax accounting income of $725,000 for the year 2014 included the following items:
Amortization of identifiable intangibles .......... $147,000
Depreciation of building ............... 115,000
Loss from discontinued operations .......... 44,000
Unusual, non-recurring gains ............. 152,000
Profit-sharing payments to employees ........... 65,000
Ewing Industries Ltd. would like to purchase Rotterdam Corporation. In trying to measure Rotterdam's normalized earnings for 2014, Ewing determines that the building's fair value is triple the book value and that its remaining economic life is double the life that Rotterdam is using. Ewing would continue the profit-sharing payments to employees, with the payments being based on income from continuing operations before amortization and depreciation.
Instructions
Calculate the 2014 normalized earnings amount of Rotterdam Corporation that Ewing would use to calculate goodwill.


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  • CreatedSeptember 18, 2015
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