For items 19 and 20:

K Corp. is considering to buy the Thrift Clothing Company and assembles the following information relative to the company being acquired on December 31, 2002:

Assets Per Book Adjusted

Current Assets P154,000 P148,000

Investments48,00042,000

Plant and equipment (net)408,800380,000

Goodwill 96,00096,000

P706,800P666,000

Liabilities and Stockholders' Equity

Current Liabilities P 32,500 P 32,500

Long-term Liabilities230,000230,000

Capital stock230,000230,000

Retained earnings 214,300173,500

P706,800P666,000

The following information pertains to the Retained Earnings:

Per Book Adjusted

Ret. earnings - 1/1/2000 P183,340 P151,900

Add: Net income for 2000-2002

(after loss on sale of fixed

assets *)74,16064,800

Less: Dividends for 2000-2002 (43,200)(43,200)

Ret. earnings - 12/31/2002 P 214,300P 173,500

* Loss on sale of fixed

assets in 2002 P73,440P79,200

Assume that earnings of the future are expected to be the same as average normal earnings of the past three years, 10% is accepted as a reasonable return on net assets excluding goodwill as of December 31, 2002, and average earnings in excess of 10% are capitalized at 15% in determining goodwill.

19.How much is the average normal earnings:

(a) P21,600 (b) P24,720 (c) P48,000 (d) P49,200

20.How much is the goodwill?

(a) P320,000 (b) P144,000 (c) P115,000 (d) P123,000