Reference no: EM132781368
ABC Co. engaged your services to compute the goodwill and purchase price for the acquisition of XYZ Corp. The following data are available for XYZ Corp.:
Current Asset 6,000,000
Current Liabilities 3,500,000
Investments 2,500,000
Non-current liabilities 2,500,000
Property, Plant and Equipment 13,000,000
Ordinary shares 7,000,000
Share Premium 1,500,000
Accumulated Profits 7,000,000
Total Assets 21,500,000
Total Liabilities and Equity 21,500,000
You found out that the investments have a fair value of P2,000,000 and the current assets and property, plant and equipment are understated by P800,000 and P1,850,000 respectively. All other assets and equities are properly stated. An examination of the company's income for the last 4 years revealed that the total earnings amounted to P9,000,000. The said earnings include gain on sale during the last year of P100,000 and P150,000 annual bonus of the president. The normal rate of return is 10%.
Problem1 : Compute for the goodwill (purchase of goodwill for 4 years).
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