Use the Following Information for Questions

question 44

Short Answer

Use the following information for questions
Jeremiah Inc.is being targeted for acquisition by Argo Corporation.As an analyst for
Argo, you are asked to determine the goodwill that, pending various assumptions, may be inherent in this potential transaction.
The available information relating to Jeremiah includes the following: Current net assets: $5.1 million.
Expected return on net asset for industry: 10%
Reported net income for the previous six consecutive years:

The earnings for 2007 included a $200,000 gain from the sale of a discontinued part of its business.
-Monarch Football Company had a player contract with Sidka that was recorded in its accounting records at $2.9 million.Markos Football Company had a player contract with Leber that was recorded in its accounting records at $2.8 million.Monarch traded Sidka to Markos for Leber by exchanging each player's contract.The fair value of each contract was $3 million.What amount should be shown in the accounting records after the exchange of player contracts?

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Definitions:

Land

Real estate or property, minus buildings and equipment, that is considered a fixed asset.

Buildings

Assets categorized under real estate property that are used for business operations or rented out for revenue generation.

Depreciated

The reduction in the recorded cost of a fixed asset in a manner that allocates its cost over the useful life of the asset.

Land Account

An account on the balance sheet that shows the cost of land owned by a company, not depreciated since land has an unlimited useful life.