Answer:
a. $(8000)
b. Company should choose alternative 1 and make bottles.
Explanation:
Particulars Make Bottles Buy Bottles Differential
Alternative 1 Alternative 2
Purchase Price 0 $37 $(37)
Freight Charges 0 $4 $(4)
Variable cost $33 $33
Fixed Cost $17 $17 0
Cost per unit $50 $58 $(8)
Income / (Loss) $50,000 $58,000 $(8,000)
b. The company should choose alternative 1 and make bottles. The buying of bottles will cost company loss of $8,000.
Answer:
Explanation:
From the information povided:
(a) To compute the amount of goodwill paid by Chicago Corporation
Particulars Amount ($)
Accounts Receivable 100000
Inventory 170000
Plant & Equipment 400000
Land 90000
Customer List 4000
Trade Names <u> 16000</u>
NET ASSETS (A) <u>780000</u>
<u />
Current liabilities 76000
Non-current liabilities <u>160000 </u>
NET LIABILITIES (B) <u> 236000</u>
∴
PURCHASE CONSIDERATION (A -B) 544000
<u>Less:</u> Cash Paid <u> 580000</u>
GODWILL <u> 36000 </u>
<u />
b)
In the books of Chicago Corporation, the Journal Entry to record the purchase of Naperville Company.
Account Name Dr. Cr.
Accounts Receivable A/C 100000
Inventory A/C 170000
Plant Equipment A/C 400000
Land A/C 90000
Customer List A/C 4000
Trade Names A/C 16000
Goodwill A/C 36000
Current liabilities A/C 76000
Non-Current Liabilities A/C 160000
Cash A/C 580000
c)
The minimum required amount of goodwill that Chicago can amortize by the end of 2020 is $3600.This is because the amortization can take place for a period of 10 years.
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Answer:
8.60%
Explanation:
We use the MM proposition II with taxes

ra 0.125
D 5000
E 9600 (14,600 assets = 5,000 liab + equity)
rd ??
taxes 0.34
re 0.1384
We set p the formula and solve:





rd = 0.860181818 = 8.60%
Answer:
Cost of goods sold = $576,900
Explanation:
The budgeted cost of goods sold will be the sales volume in 2020 multiplied by cost per unit .
Sales volume in year 2020= (100-10)% × sales figure for 2019
= 90% × 160,250= 144,225
Cost of goods sold per unit = cost of goods sold in 2019/Sales units in 2019
= 641,000/160250=$4
Cost of goods sold = $4× 144,225 = $576,900
Cost of goods sold = $576,900
My best estimate is 23% or lower.