Accounting Question

Computer Based Assignment

4 Assignments on elab, log in will be provided

Intro to Federal Taxation

Quiz

Advanced Accounting Homework

Chapter 1 Homework Assignment Questions

Exercise 1- 1 . Estimating Goodwill and Potential Offering Price.

Plantation Homes Company is considering the acquisition of Condominiums, Inc. early in 2020.

To assess the amount it might be willing to pay, Plantation Homes makes the following

computations and assumptions.

A. Condominiums, Inc. has identifiable assets with a total fair value of $15,000,000 and lia-

bilities of $8,800,000. The assets include office equipment with a fair value approximating book

value, buildings with a fair value 30% higher than book value, and land with a fair value 75%

higher than book value. The remaining lives of the assets are deemed to be approximately equal

to those used by Condominiums, Inc.

B. Condominiums, Inc.s pretax incomes for the years 2017 through 2019 were $1,200,000,

$1,500,000, and $950,000, respectively. Plantation Homes believes that an average of these

earnings represents a fair estimate of annual earnings for the indefinite future. However, it may

need to consider adjustments to the following items included in pre- tax earnings:

Depreciation on buildings (each year)

$ 960,000

Depreciation on equipment (each year)

50,000

Extraordinary loss (year 2019)

300,000

Sales commissions (each year)

250,000

C. The normal rate of return on net assets for the industry is 15%

Required:

A.

Assume further that Plantation Homes feels that it must earn a 25% return on its

investment and that goodwill is determined by capitalizing excess earnings. Based on

these assumptions, calculate a reasonable offering price for Condominiums, Inc. Indicate

how much of the price consists of goodwill. Ignore tax effects.

B.

B. Assume that Plantation Homes feels that it must earn a 15% return on its investment,

but that average excess earnings are to be capitalized for three years only. Based on these

assumptions, calculate a reasonable offering price for Condominiums, Inc. Indicate how

much of the price consists of goodwill. Ignore tax effects.

Exercise 1- 2: Estimating Goodwill and Valuation

Alpha Company is considering the purchase of Beta Company. Alpha has collected the

following data about Beta:

Beta Company

Estimated

Book Value

Market Value

Total identifiable assets

$585,000

$750,000

Total liabilities

320,000

320,000

Owners equity

$265,000

Cumulative total net cash earnings for the past five years of $850,000 includes extraordinary

cash gains of $67,000 and nonrecurring cash losses of $48,000.

Alpha Company expects a return on its investment of 15%. Assume that Alpha prefers to use

cash earnings rather than accrual-based earnings to estimate its offering price and that it

estimates the total valuation of Beta to be equal to the present value of cash-based earnings

(rather than excess earnings) discounted over five years. (Goodwill is then computed as the

amount implied by the excess of the total valuation over the identifiable net assets valuation.)

Required:

A.

Compute (a) an offering price based on the information above that Alpha might be

willing to pay and (b) the amount of goodwill included in that price.

B.

Compute the amount of goodwill actually recorded, assuming the negotiations result in a

final purchase price of $625,000 cash.

Exercise 1-3: Estimated and Actual Goodwill

Passion Company is trying to decide whether or not to acquire Desiree Inc. The following

balance sheet for Desiree Inc. provides information about book values. Estimated market values

are also listed, based upon Passion Companys appraisals.

Desiree Inc.

Desiree Inc

Book Value

Market Value

Current assets

$260,000

$260,000

Property, plant & equipment (net)

650,000

740,000

Total assets

$910,000

$1,000,000

Total liabilities

$400,000

$400,000

Common stock, $10 par value

160,000

Retained earnings

350,000

Total liabilities and equities

$910,000

Passion Company expects that Desiree will earn approximately $150,000 per year in net income

over the next five years. This income is higher than the 12% annual return on tangible assets con-

sidered to be the industry norm.

Required:

A.

Compute an estimation of goodwill based on the information above that Passion might be

willing to pay (include in its purchase price), under each of the following additional

assumptions:

(1) Passion is willing to pay for excess earnings for an expected life of five years

(undiscounted).

2) Passion is willing to pay for excess earnings for an expected life of five years, which should

be capitalized at the industry normal rate of return.

(3) Excess earnings are expected to last indefinitely, but Passion demands a higher rate of return

of 20% because of the risk involved.

B.

Comment on the relative merits of the three alternatives in part (A) above.

C.

Determine the amount of goodwill to be recorded on the books if Passion pays $800,000

cash and assumes Desirees liabilities.

Business Law II

PLEASE READ CHAPTERS 19 AND 20 AND REVIEW THE POWER POINTS UNDER COURSE POWER POINTS AND SYLLABUS

The assignments will use your text, power points and online research.

All submissions need to be organized and labeled by question, separated with bold headings, not just lumped into one paragraph.

YOU WILL HAVE TWO WEEKS TO COMPLETE ASSIGNMENTS COVERING TWO CHAPTERS,

ONE WEEK TO COMPLETE ASSIGNMENTS COVERING ONE CHAPTER

MANAGE YOUR TIME ACCORDINGLY

FOR CHAPTER 19

1. PLEASE ANSWER QUESTION 8 on page 385 & Taking Sides on page 388 (17th Edition)

8 on page 391 & Taking Sides on page 394 (18th Edition)

2. Describe an Agencyxthat you have encountered, examples may include Real Estate Agent, Insurance Agent, Talent Agent, Managing Agent, Sales Agent, Rental Agents etc.

a. What isxthe role of that agent, who is thexPrincipal?

b. Thinking back, who was that agent loyal to?

c. Did the transaction go well?

3. SUMMARIZE Any TWO CASES AT THE END OF THE CHAPTER AS FOLLOWS: (one paragraph for each section below (1-4) for each case )

(For a review look at page 12 of your textbook and the samples in the announcements)

This will be the format for all assignment cases due this Session!

FULL CREDIT WILL ONLY BE RECEIVED FOR PROPERLY SUMMARIZED CASES.

FORMAT:

1. THE FACTS OF THE CASE

   2 THE ISSUE AT THE LAW THE COURT IS CONSIDERING

   3. HOW THE LAW WAS APPLIED IN THIS CASE

   4. CONCLUSION OF THE COURT

To review how to brief a case please see the end of chapter 1 of your text book for a sample.

SAMPLE CASE SUMMARIES ARE IN THE ANNOUNCEMENTS. Pay careful attention to the instructions on briefing a case as this is the format that is required for all chapters this semester. Always cite all references that you use to complete the assignments!!

FOR CHAPTER 20

** Reminder- All work is submitted through safe-assign, you can review your safe-assign similarity score. Cutting and Pasting from websites, or copying from any student will not be tolerated.

(For this assignment you will have two weeks to complete)

Discussion board

Please read through the links above:

Using what you have learned in Chapters 19&20 , who is liable and how? How high does the liability spread in these cases?

Comment on at least one peer

Reply to this

The court examines the relationship by projecting on the degree control the employer has over its employees, how work is done, financial control and the economic reality of relationship.