Answer:
A. $1,085,000
B. $316,000
Explanation:
A. Computation of an estimated fair value for any goodwill associated with Kivi purchasing Joe’s Garage
Actual average net income per year $220,000
Sales multiplier 9.25 times
Estimated fair market value of Joe's Garage$2,035,000
($220,000*9.45 Times)
Fair market value of identifiable assets($950,000)
Estimated goodwill of Joe's Garage$1,085,000
($2,035,000-$950,000)
b. Computation for an estimated fair value for any goodwill associated with Kivi purchasing Gas N’ Go.
Actual average net income per year$275,000
Earnings for Gas N' Go($196,000)
(20%×$980,000)
Estimated excess earnings of Gas N' Go$79,000
($275,000-$196,000)
Management expect excess earning of four years ×4
Estimated goodwill of Gas N' Go $316,000
($79,000×4 years)
Answer:
$3.5 million
Explanation:
Data given in the question
Book value of the division assets = $33.50 million
Fair value of the division assets = $30 million
The sum of estimated future cash flows generated = $38 million
So, by considering the above information, the amount of impairment loss is
= Book value of the division assets - fair value of the division asset
= $33.5 million - $30 million
= $3.5 million
Since the fair value is less than the book value so the difference should be recorded as an impairment loss
Answer:
Operating lease
Explanation:
An operating lease is basically a lease contract that allows the lessee to use the assets but it doesn't transfer any ownership rights. It is like renting a house, you can use it as long as pay the rent, but the house isn't yours. Operating leases are not included in the balance sheet, while financial leases are.
In this case, Star Company may use the copy machines but it must return them in three years.
Answer:
Intermediaries
Explanation:
Intermediaries are individuals or organisations whose main function is to ensure that goods are moved smoothly through the various channels of distribution. They act as a link between the manufacturers and the consumers.
Intermediaries acts as a middleman, they provide feedbacks to the manufacturers on the customer's assessment of the product. They also help in the promotion of goods by employing different advertising strategies inorder to showcase the product to the potential customers.
Hence intermediaries play a crucial role in efficiently making products available to target markets in the required varieties and quantities.
Answer: An effective Internal Control
Auditors must evaluate internal controls
Auditor's work overseen by Public Accounting Board
Explanation:
The early part of the 21st century saw shocking financially improper activities by companies such as WorldCom and Enron exposed to the world. Investor Confidence was shaken and the government needed to do something to restore it.
This was why in 2002, the US Congress passed the Sarbanes-Oxley act that aimed to ensure that the actions of those companies were never repeated.
The act requires the following;
a) An effective Internal Control
The act requires that companies enact very effective Internal controls to detect financial irregularities and even went forward to make it the responsibility of the Top Executives to ensure that this is so.
b) Auditors must Evaluate Internal Controls.
Auditors had to change their auditing strategies that were deemed inefficient. They are now required to properly evaluate in-depth, the internal controls that a company adopts to be able to give an opinion on it and they do this based on the guidelines of the Public Accounting Board.
c) Auditor's work overseen by Public Accounting Board
The Public Company Accounting Oversight Board (PCAOB) was established by the Sarbanes-Oxley Act with it's main purpose being to monitor and oversee auditors as they audit companies so that they may protect the public from false financial information. They set rules and standards that Auditors must follow and these rules in turn have to be approved by the Securities and Exchanges Commission (SEC).
