Asked by Claudia Gonzalez on Apr 28, 2024
Verified
The Jared Corporation is contemplating the acquisition of the Jonathan Company.Jared believes that Jonathan has goodwill, but Jared is not clear as to how to determine a value of Jonathan Company's goodwill.
Required:
Describe briefly the series of steps that should be used by Jared Corporation in calculating an estimate of the value of Jonathan Company's goodwill.
Goodwill
An intangible asset that arises when a company acquires another company for a price higher than the fair value of its net identifiable assets.
Acquisition
An acquisition involves one company purchasing another company or its assets, often to expand its operations or enter new markets.
- Examine the accounting methods applied to acquired intangible assets, such as patents and goodwill.
Verified Answer
ZK
Zybrea KnightMay 05, 2024
Final Answer :
Jared Corporation should use the following procedures in order to calculate an estimate of the value of Jonathan Company's goodwill: a. Estimate the average future annual earnings from JonathanCompany sidentifiable net assets.
b. Estimate the rate (or rates) of retum that should be eamed on Jonathan's identifiable net ass ets
c. Estimate the current market value of Jonathan's identifiable net assets.
d. Calculate the estimated excess annual earnings of Jonathan
e. Estimate the expected life of the excess amula earnings.
f. Calculate the present value of the estimated excess amual earnings.
b. Estimate the rate (or rates) of retum that should be eamed on Jonathan's identifiable net ass ets
c. Estimate the current market value of Jonathan's identifiable net assets.
d. Calculate the estimated excess annual earnings of Jonathan
e. Estimate the expected life of the excess amula earnings.
f. Calculate the present value of the estimated excess amual earnings.
Learning Objectives
- Examine the accounting methods applied to acquired intangible assets, such as patents and goodwill.
Related questions
An Argument in Favor of Capitalizing Purchased Goodwill Is That ...
The Jessie Company Acquired a Competitor Company in January 2010 ...
Which of the Following Is Not True Regarding the Accounting ...
Smith Corporation Is Interested in Acquiring Dawson Company and Has \( ...
Which of the Following Is an Intangible Asset That Is ...