Ask Question, Ask an Expert


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.

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.

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

Many grocery stores and large retailers such as wal-mart

Many grocery stores and large retailers such as Wal-Mart and K-Mart have installed self checkout systems so shoppers can scan their own items and cash out themselves. How do customers like this service and how often do t ...

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 ...

1 where is lead most likely to be found in a household2

1. Where is lead most likely to be found in a household? 2. Identify the criteria for determining existence of wetlands. 3. What happens to land containing an endangered species habitat? 4. Discuss a landowner's rights i ...

Each of the following research designs has a potential

Each of the following research designs has a potential threat to the internal validity of the research. For each, indicate what the confounding variable is and how it might have been eliminated. a. The Pepsi-Cola Company ...

1 how has the community development block grant served to

1. How has the Community Development Block Grant served to help communities perform local mitigation? 2. Why do some people consider insurance to not be a proper mitigation method? 3. Why are structural controls a contro ...

Sabrinas just paid an annual dividend of 179 per share this

Sabrina's just paid an annual dividend of $1.79 per share. This dividend is expected to increase by 2.5percent annually. Currently, the firm has a beta of .87 and a stock price of $31 a share. The risk-free rate is 4.5pe ...

What are the essential conditions for corrosion if

What are the essential conditions for corrosion? If corrosion occurs, which element is eaten away, the anode or the cathode? Will an uncoated ASTM A325 bolt act as an anode or a cathode? What combination of factors can l ...

Common stock of pr co has an expected return of 12 the

Common stock of pr Co. Has an expected return of 12% . The expected market return is 14% and risk free rate is 2%. What is pr Co.s Beta coefficient?

In a mass-transfer spray column a liquid is sprayed into a

In a mass-transfer spray column, a liquid is sprayed into a gas stream, and mass is transferred between the liquid and gas phases. The mass of the drops that are formed from a spray nozzle is considered a function of the ...

Now that tony has seen the quality of your work he is

Now that Tony has seen the quality of your work, he is considering promoting you into a financial analyst position. However, you must still prove your analytical skills. He specifically wants to know the following: • Do ...

  • 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

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro