Rotterdam Corporations pretax accounting income of $725,000 for the year 2020 included the following items: Amortization of
Question:
Rotterdam Corporation’s pretax accounting income of $725,000 for the year 2020 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 2020, 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 2020 normalized earnings amount of Rotterdam Corporation that Ewing would use to calculate goodwill.
CorporationA Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
Intermediate Accounting Volume 1
ISBN: 978-1119496496
12th Canadian edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Irene M. Wiecek, Bruce J. McConomy