Revenues and expenses vary little from month to month

Assignment Help Accounting Basics

Reference no: EM13615034

Benjamin O'Henry has owned and operated O'Henry's DataServices since its beginning ten years ago. From all appearances,the business has prospered. In the past few years, you have becomefriends with O'Henry and his wife. Recently, O'Henry mentioned thathe has lost his zest for the business and would consider selling itfor the right price. You are interested in buying this business,and you obtain its most recent monthly unadjusted trial balancewhich follows:

O'Henry's Data Services Unadjusted Trial Balance November30, 20XX
Cash....................................	$9,700
Accountsreceivable...........................	7,900
Prepaidexpenses............	2,600
Furniture, fixtures, & equipment	151,300
Accumulated depreciation		$15,600
Accountspayable............		3,800
Salarypayable..................
Unearned service revenue		6,700
Benjamin O'Henry, capital		137,400
Benjamin O'Henry, withdrawals	2,000
Servicerevenue............		14,300
Rentexpense...............
Salary expense............	3,400
Utilities expense.........	900
Depreciation expense
Supplies expense......
Total.................................................	$177,800	$177,800

Revenues and expenses vary little from month to month, andNovember is a typical month. Your investigation reveals that theunadjusted trial balance does not include the effects of monthlyrevenues of $2,100 and monthly expenses totaling $2,750. If youwere to buy O'Henry's Data Services, you would hire a manager whowould require a monthly salary of $3,000.

The most you would pay for the business is 20 times the monthl ynet income you could expect to earn from it. Compute this possibleprice. The least O'Henry will take for the business is his endingcapital. Compute this amount. Under these conditions, how much should you offer O'Henry? Give your reason.

Reference no: EM13615034

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