In Which of the Following Situations Would Martinez Industries Include

question 61

Multiple Choice

In which of the following situations would Martinez Industries include goodwill in its balance sheet?

• A) The fair market value of Martinez's net identifiable assets amounts to $2,000,000. Normal earnings for this industry is 15 percent of net identifi?able assets. Martinez's net income for the past five years has averaged $390,000.
• B) Martinez spent $800,000 during the current year for research and development for a new product which promises to generate substantial revenue for at least 10 years.
• C) Martinez acquired Baxter Electronics at a price in excess of the fair market value of Baxter's net identifiable assets.
• D) A buyer wishing to purchase Martinez's entire operation has offered a price in excess of the fair market value of Martinez's net identifiable assets.

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