Use the Following Information for Questions $\quad$ $\quad$ $\quad$

question 80

Multiple Choice

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 aszete: $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\$5.1$ millien
Expected return on net assets for industry: $\quad$$\quad$$\quad$$\quad$$10 \%$ Reported net income for the previous six consecutive years:
$\begin{array}{llll}\text { YearAmount } &\text { Year }&\text { Amount } & \\2015 & \$ 710,000 & 2018 & \$ 745,000 \\2016 & \$ 680,000 & 2019 & \$ 815,000 \\2017 & \$ 980,000 & 2020 & \$ 835,000\end{array}$ Net income for 2020 included a $ 200,000 gain from the sale of a discontinued operation.
-Estimated goodwill by capitalizing average excess earnings at 14% is

• A) $ 2,029,762.
• B) $ 1,791,667.
• C) $ 1,654,331.
• D) $ 760,833.

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Definitions:

Counter-Analogy

A contrasting comparison used to refute or argue against a previous analogy by highlighting dissimilar aspects.

Analogy Reversal

The process of flipping an analogy to illustrate a point or to create a counterargument.

Opponent

A person or group competing against another in a contest, fight, game, or debate.

Burden Of Proof

The obligation to present evidence to support one's claim or argument in a debate or legal case.