Sherrie Company purchased Houston Company for P7500000 cash A schedule of the

Sherrie company purchased houston company for

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5. Sherrie Company purchased Houston Company for P7,500,000 cash. A schedule of the market value of Hou-ston’s assets and liabilities as of the purchase date follows.Cash 50,000 Accounts receivable 800,000 Inventory 1,350,000 Property, plant and equipment 4,300,000 6,500,000 Current liabilities 800,000 Note payable bank (long-term) 1,200,000 2,000,000 Net asset market value 4,500,000 What amount of goodwill shall recognize goodwill from the acquisition? a. 1,000,000 c. 950,000 b. 3,000,000 d. 0 6. Simone Company engaged your services to compute the goodwill in the purchase of Barker Company January 1, 2017, which provided the following: Net income Net assets 2013 1,400,000 6,000,000 2014 1,600,000 8,000,000 2015 2,000,000 8,800,000 2016 2,200,000 9,200,000 It is agreed that goodwill is measured by capitalizing excess earnings at 25% with normal return on average net assets at 15%. How much is the purchase price for Barker Company? 7.The owners of Jello Company are planning to sell the business to new interests. The cumulative net earnings for the past 3 years was P7,000,000 including casualty loss of P500,000. The current value of net assets of Jello Company was P22,000,000. Goodwill is determined by capitalizing average earnings at 10%. What is the amount of goodwill? 8.On January 1, 2017, Kris Company acquired the following intangible assets: * A trademark for P2,000,000. The trademark has 8 years remaining in its legal life. It is anticipated that the trademark will be renewed in the future indefinitely, without a problem. * A patent for P4,000,000. Because of market conditions, it is expected that the patent will have an economic life for just 5 years, although the remaining legal life is ten years. Because of a decline in the economy, the trademark us now expected to generate cash flows of just P120,000 per year. The useful life of the trademark still extends beyond the foreseeable horizon. The cash flows ex-pected to be generated by the patent are P500,000 annually for each of the next 4 years. The appropriate dis-count rate for all intangible assets is 8%. The present value 1 at 8% for four periods is .74 and the present val-ue of an ordinary annuity of 1 at 8% for four periods is 3.31. What is the total impairment loss for the intangible assets?
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PAGE 18Computer Software
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