Ivani Corporation has net assets at December 31, 1998 valued at $6,000,000. Its net income for...

 

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Ivani Corporation has net assets at December 31, 1998 valued at $6,000,000. Its net income for the past several years has been stable, averaging $1,300,000 per year. Normal rate of return in this industry is 16%. Requirements: (A) (B) (C) Compute the amount of Ivani Corporation's theoretical goodwill. Assume that excess earnings will continue indefinitely and are to be discounted at 20%. Dexter, Inc. purchases Ivani Corporation for $8,100,000. Assuming that specific plant assets of Ivani Corporation are revalued upward by Dexter, in the amount of $400,000, how much goodwill would be recorded by Dexter, Inc.? Treat part (B) independently of part (A). Would Dexter, Inc. be required to amortize this newly acquired goodwill? If so, how? 1,300,000 Average Ivani Corporation has net assets at December 31, 1998 valued at $6,000,000. Its net income for the past several years has been stable, averaging $1,300,000 per year. Normal rate of return in this industry is 16%. Requirements: (A) (B) (C) Compute the amount of Ivani Corporation's theoretical goodwill. Assume that excess earnings will continue indefinitely and are to be discounted at 20%. Dexter, Inc. purchases Ivani Corporation for $8,100,000. Assuming that specific plant assets of Ivani Corporation are revalued upward by Dexter, in the amount of $400,000, how much goodwill would be recorded by Dexter, Inc.? Treat part (B) independently of part (A). Would Dexter, Inc. be required to amortize this newly acquired goodwill? If so, how? 1,300,000 Average