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:

Automobiles

Motor vehicles with four wheels designed primarily for passenger transportation on roads.

Supply

The total quantity of a good or service that businesses are willing and able to sell at a given price level.

Product

Any item or service that is created through a process and is offered for sale to consumers.

Resources

Inputs used in the production of goods and services, such as labor, capital, land, and technology.