Taras Treasures Balance Sheet 12/31/20 Assets:Book ValueFair Market Value Inventory$500,000$575,000 P/P/E$800,000$1,200,000 Accumulated Depreciation($225,000) Total Assets$1,075,000 Liabilities: Bonds
Question:
Tara’s Treasures
Balance Sheet
12/31/20
Assets:Book ValueFair Market Value
Inventory$500,000$575,000
P/P/E$800,000$1,200,000
Accumulated Depreciation($225,000)
Total Assets$1,075,000
Liabilities:
Bonds Payable$950,000$1,100,000
Equity:
Stock$25,000
Retained Earnings$100,000
Total Liab & Equity$1,075,000
I. Glenn’s Gems approaches Tara to purchase her Company…all of the Assets & Liabilities for the following prices:
a. $800,000 Cash
b. $95,000 Cash
Required:
Record the entry on the books of BOTH the Buyer & Seller for both prices.
II. Tara is attempting to calculate the Value of GOODWILL before she negotiates the Price with the seller…Let’s assume that a normal investment in P/P/E is expected to generate revenue of 10% of the investment…
a. Assume Tara Earns revenue of $125,000 per year…Calculate the EXCESS Earnings
b. Assume Tara wants her Goodwill to be = to 8 Years of Excess Earnings…What would Goodwill be under this assumption?
c. Tara wants to calculate the Present Value of the Revenue Excess(Annuity) at 10% for 8 years factor: 5.86842…What would Goodwill be?
Expert Answer:
I Recording the entry on the books of both the buyer and seller a Price 800000 Cash 1 Sellers Entry ... View the full answer
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1285190907
8th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
