Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

problem 1:
Breaker Company purchased a new piece of equipment on July 1, 2010 at a cost of $300,000.
The equipment has an estimated useful life of 5 years and an estimated residual value of $25,000. The current year end is 12/31/10. Breaker records depreciation to the nearest month.
The equipment is a Class 8 asset with a maximum CCA rate of 20%. Answer the following, being
sure to show all calculations.

Instructions:
a. What is straight-line amortization for 2011?

b. What is CCA depreciation for 2011?

c. What is double declining-balance depreciation for 2011?

d. If Breaker expensed the total cost of the equipment at 7/1/10, what was the effect on 2010 and
2011 income before taxes, assuming Breaker uses straight-line amortization? (i.e the amount
overstated or understated each year)

e. If, at the end of 2012, before depreciation for the year is recorded Breaker Company decides the equipment still has five more years of life beyond 12/31/12, with a residual value of $25,000, what is straight-line depreciation for 2012?
(Assume straight-line used in all years.)

problem 2:

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 assets: $5.1 million.
Expected return on net asset for industry: 10%
Reported net income for the previous six consecutive years:

Year Amount Year Amount
2005 $710,000 2008 $745,000
2006 $680,000 2009 $815,000
2007 $980,000 2010 $835,000

The earnings for 2007 included a $200,000 gain from the sale of a discontinued part of its business.

Instructions:
Answer the following problems, but show all your calculations (If your answer is correct, but you have not correctly shown how you arrived at the answer, the credits will not be valid)

a. Estimated goodwill by capitalizing average excess earnings at 14% is
a. $1,791,667
b. $760,833
c. $2,029,762
d. $1,654,331

b. Assuming that excess earnings are expected to continue for 8 years, and ignoring the time value of money, estimated goodwill is
a. $2,273,000
b. $2,006,667
c. $1,854,333
d. $1,531,733

c. Assuming that excess earnings are expected to continue for 8 years, and average excess earnings are discounted at 11%, estimated goodwill is (use interest table)
a. $1,784,331
b. $1,661,432
c. $1,462,356
d. $1,290,818

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M928783

Have any Question? 


Related Questions in Basic Finance

How have increased competition and price volatility

How have increased competition and price volatility affected financial innovation? What are some specific types of innovation that deal with these factors?

Capital-budgeting criteriathe net present value npv of a

Capital-Budgeting Criteria The net present value (NPV) of a project is a measure of the difference between the project's value and its cost. The internal rate of return (IRR) is another measure of the project's attractiv ...

Explain why a yield curve can be negatively sloped would

Explain why a yield curve can be negatively sloped. Would interest rates be abnormally high or low? What would be the overall expectation of the direction of future short- term interest rates?

Your firm needs a computerized machine tool lathe which

Your firm needs a computerized machine tool lathe which costs $60,000 and requires $13,000 in maintenance for each year of its 3-year life. After three years, this machine will be replaced. The machine falls into the MAC ...

Explain why a central bank is usually more effective at

Explain why a central bank is usually more effective at holding the value of its domestic currency at an artificially low level for a sustained period than at an artificially high level.

Impact of stock market uncertainty consider a period in

Impact of Stock Market Uncertainty : Consider a period in which stock prices are very high, such that investors begin to think that stocks are overvalued and their valuations are very uncertain. If investors decide to mo ...

External scale economies are an influence on the pattern of

"External scale economies are an influence on the pattern of international trade because they affect the number of varieties of a product that are produced in a country." Do you agree or disagree? Why?

Speculation with futurestoday the gross price of a 10-year

Speculation with Futures Today, the gross price of a 10-year bond with $1,000 principal amount is 116.277. At the same moment, the price of the 10-year futures contract which expires in two months is 98.03. Its nominal a ...

Managerial report with 5 steps in exceltyler is 37 years

Managerial Report with 5 steps in Excel Tyler is 37 years old and would like to establish a retirement plan. Develop a spreadsheet model that could be used to assist Tyler with retirement planning. Your model should incl ...

Assignmentcalculate the solutions to the following problems

Assignment Calculate the solutions to the following problems. YOU MUST SHOW YOUR WORK. 1. Low Tech Company has an expected ROE of 10%. The dividend growth rate will be ________ if the firm follows a policy of paying 40% ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate