1 answer

1) world corporation is buying all the assets and assuming all the liabilities The following information...

Question:

1) world corporation is buying all the assets and assuming all the liabilities The following information is available for Maxton at the day of the purchase:

cash 300,000 Accounts payable 50,000

Accounts Rec 100,000 Bond payable 100,000

Inventory 100,000 Common stock 200,000

Land 300,000 Retained Earnings 250,000

The inventory is worth $50,000 and the land is worth $500,000. Additionally, the Bond Payable debt is payable interest only at 10% per year for the next 5 years and then the principal is due. Current interest rates for similar debt is 8%. World Corp will pay $1,000,000 for Maxton. How much of the purchase price will World Corp debit to good will?

2) Shyam wants to calculate how much money he will get after 2 years at a rate of interest of 10% p.a. computed half-yearly on a sum of money of $ 5000?

Please provide the correct answer for both.


Answers

1. In order to calculate the amount of goodwill, we need to deduct the net assets value from the purchase consideration.

Net Assets = 300,000+ 100,000 + 50,000 + 500,000 - 50,000 - 100,000 - 200,000

- 250,000 = 800,000

good will = 200,000

2. Amount = $ 5,000 × (1.05)^4

= $ 6,077.53

.

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