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What is the amount of goodwill

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Question - Meryll Company is negotiating to acquire the net assets LeMans Company. Under the plan, Meryll is willing to pay for goodwill computed by capitalizing at 25% LeMans' average earnings in excess of the 10% normal return based on the appraised value of net assets. This is the same level of income experienced by companies similar to LeMans line of business. LeMans' income for the past three years averaged 3,000,000. LeMans' assets and liabilities are

Book Value Appraised Value

Assets excluding goodwill P30,000,000 P39,000,000

Liabilities 10,500,000 10,500,000

What is the amount of goodwill?

A. 600,000

B. 420,000

C. 150,000

D. 105,000

Reference no: EM133163244

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