Computation of Goodwill Chopin Corporation Has Net Assets (Total Assets Minus Total Liabilities)valued

question 78

Essay

Computation of goodwill
Chopin Corporation has net assets (total assets minus total liabilities)valued at $880,000 and has earned an average net income of $132,000 per year for the past several years.Sands Company is negotiating the purchase of the company and has agreed to pay an amount equal to the value of the net identifiable assets,assume the liabilities,and pay a sum for goodwill equal to the earnings in excess of 12% on net assets,expected to continue for five years.What is the amount for goodwill Sands is including in its offer? $________

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Definitions:

Predicted Values

The estimates or outcomes produced by a model, based on the input variables.

Residuals

The variations between the actual values and the ones forecasted in regression analysis.

Oil Quality

A measure of the chemical and physical properties of an oil, determining its suitability for specific uses.

Regression Equation

A mathematical formula used to predict a dependent variable based on one or more independent variables.