What price should the investor offer

Assignment Help Accounting Basics
Reference no: EM13127919

During the past several years the annual net income of Avery Company has averaged $540,000. At the present time the company is being offered for sale. Its accounting records show the book value of net assets (total assets minus all liabilities) to be $2,800,000. The fair value of Avery's net identifiable assets, however, is $3,000,000.

An investor negotiating to buy the company offers to pay an amount equal to the fair value for the net identifiable assets and to assume all liabilities. In addition, the investor is willing to pay for goodwill an amount equal to the above-average earnings for five years.

On the basis of this agreement, what price should the investor offer? A normal return on the fair value of net assets in this industry is 15 percent.

Reference no: EM13127919


Write a Review


Accounting Basics Questions & Answers

  Which method is generally accepted

Which method is generally accepted? Why do you think this method is generally accepted? Explain your position.

  Probability distribution of car arrivals

The number of cars arriving at Joe Kelly's oil change and tune-up place during the last 200 hours of operation is observed to be the following: Determine the probability distribution of car arrivals.

  Prepare the entry or entries related to the machine

Quigley co. bought a machine in January 1, 2009 for $875,000. It had a $75,000 estimated residual value and ten year life. The repairs and maintance expense account was incorrectly debited on the purchase date. Quigley uses straight-line depreciat..

  Unifying concepts-high-low method-scatterplot

You have been hired as a consultant for Jones Inc. The company manufactures high-density compact disks and sells them to a wide variety of business clients.

  Accumulated straight-line depreciation and book value

An asset purchased by A Corporation for $15,000 ON 01/01/1997 also incurred freight charges of $200 and installation cost of $1,000.The asset had a life expectancy of eight years and a salvage value of $2,800.

  Inventories reflected by accounting records

Carly Manufacturing Company's accounting records reflect the following inventories:

  Define the number of shares outstanding

Smelling Company declared a 2-for-1 stock split on its common stock in order to intentionally reduce the market value of its stock so that it would be an attractive investment for a larger set of investors.

  Internal auditors-forensic accounting investigations

How should internal auditors help, if at all, with forensic accounting investigations?

  Determining optimal price and output

Suppose the two firms act as perfect competitors and try to out compete each other and do not collude, what would be the optimal industry price and output?

  What is the maximum amount of the dstribution

Company A, a calender year corporation, has a deficit in current E & P of $100,000 and a $290,000 positive balance in accumulated E & P.

  Distributing sales and properties to shareholders

The corporation owns a building with a $160,000 adjusted basis and a $120,000 fair market value. The company has earnings and profits of $200,000.

  Compare the advantages of using the retail method

High-volume retailers generally use the retail method for valuing inventories Instead of the various cost methods. Identify and evaluate the conditions that may distort the results under the retail method.Compare the advantages of using the retail..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd