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question goodwill arises when one firm acquires the net assets of anotherfirm and pa 4284574

Question

Goodwill arises when one firm acquires the net assets of anotherfirm and pays more for those net assets than their current fairvalue. Suppose that Got Em Co. had operating income of $56,000 andnet assets with a fair market value of $163,000. Want Them Co. pays$283,000 for Got Em Co.'s net assets and business activities.

Required:

a.

How much goodwill will result from this transaction?

 

 

   

 

b.

Calculate the ROI for Got Em Co. based on its present operatingincome and the fair market value of its net assets. (Roundyour answer to 2 decimal places.)

 

 

 

c.

Calculate the ROI that Want Them Co. will earn if the operatingincome of the acquired net assets continues to be $56,000.(Round your answer to 2 decimal places.)

 

 

 

d.

Want Them Co. is willing to pay $120,000 more than fair marketvalue for the net assets acquired from Got Em Co. as it representsgoodwill and the expected superior earnings in future years.

 

 

True

 

False

 

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