An increase in the rate of expected inflation will Group of answer choices shift the demand for loanable funds to the left (down). shift the supply of loanable funds to the left (down). shift demand and supply for loanable funds to the right (up), decreasing interest rates. shift demand and supply for loanable funds to the right (up), increasing interest rates.
Answers
Answer:
shift demand and supply for loanable funds to the right (up), increasing interest rates.
Explanation:
According to the Fisher hypothesis when there is an increase in the expected inflation there is an equal increase in nominal interest rates.
As interest rates rise demand and supply for loanable funds will rise. This is illustrated in the attached diagram. Interest rate moves from i0 to i1.
Inflation is a reduction in the purchasing power of money. When inflation increases money regulation agencies reduce supply of money as a way to reduce price increase. This in turn reduces the amount of loanable funds commercial banks have to give out
Related Questions
The stock ABC has a beta of 1.6 and its standard deviation is 30%. Its correlation coefficient with the market return is 0.8. What is the standard deviation of the market return? A. None of the answers is correct B. 18% C. 20% D. 15%
Answers
Answer: D. 15%
Explanation:
Beta is given as 1.6 but is calculable by the formula;
Beta = Correlation Coefficient of stock with market returns * [tex]\frac{Standard Deviation of stock returns}{Standard Deviation of market returns}[/tex]
1.6 = 0.8 * 30%/Sdm
30% /Sdm = 1.6/0.8
30% / Sdm = 2
Sdm * 2 =30%
Sdm = 30%/2
Sdm = 15%
Suppose the price level and value of the U.S. Dollar in year 1 are 1 and $1, respectively. Instructions: Round your answers to 2 decimal places. a. If the price level rises to 1.35 in year 2, what is the new value of the dollar?
Answers
Answer:
0.74
Explanation:
Data provided in the question
Price level = 1.35
According to the given situation, the computation of the new value of the dollar is shown below:-
The New value of the dollar = 1 ÷ Price level
= 1 ÷ 1.35
= 0.74074
or
= 0.74
Therefore for computing the new value of the dollar we simply applied the above formula.
Time Warner shares have a market capitalization of billion. The company is expected to pay a dividend of per share and each share trades for . The growth rate in dividends is expected to be % per year. Also, Time Warner has billion of debt that trades with a yield to maturity of %. If the firm's tax rate is %, compute the WACC?
Answers
Complete Question:
Time Warner shares have a market capitalization of $50 billion. The company is expected to pay a dividend of $0.30 per share and each share trades for $30. The growth rate in dividends is expected to be 7% per year. Also, Time Warner has $15 billion of debt that trades with a yield to maturity of 8%. If the firm's tax rate is 30%, what is the WACC?
Answer:
7.5%
Explanation:
We can calculate WACC using the following formula:
WACC = Ke * MV of Equity / (MV of Equity + MV of Debt) + Kd * MV of Debt / (MV of Equity + MV of Debt)
Here:
Market Value of Equity is $50 billion
Market Value of Debt is $15 billion
Ke is % (Step 1)
Kd is 8%
By putting values, we have:
WACC = 8.07% * $50 Billion / ($50 Billion + $15 Billion) + 8% * $50 Billion / ($50 Billion + $15 Billion)
WACC = 7.5%
Step 1: Calculate Ke
We can calculate Ke using the following formula:
Ke = Do * (1 + g) / P + g
Here
Do is the dividend per share which is $0.3
g is the growth rate which is 7%
And
P is the market value of share which is $30 per share.
Ke = $30 * (1 + 7%) / $30 + 7% = 8.07%
Reports that trace the entry of and changes to critical data values are called ____ and are essential in every system.
Answers
Answer:
audit trails
Explanation:
Reports that trace the entry of and changes to critical data values are called audit trails and are essential in every system.
who are the customers for textbooks? What do these customers want in terms of goods and services related to textbooks? From the publishers point of view, who are the key customer?
Answers
Answer:
the customers for textbooks are students and schools
Akram owns a small farm. He employs 80 workers in the field and has recently hired a manager to help him manage the farm. The income of the business varies greatly during the year. The farm makes a small profit but Akram is ambitious. He wants to take over a neighbour’s farm and increase the range of crops he sells. He thinks that he needs long-term finance and plans to take out bank loan to pay for the takeover. He has already borrowed money to buy a new tractor. A friend has advised him to form a company and sell shares
Answers
Question Completion:
Requirement. Identity two types of short-term finance Akram could use when the farm income is low
Answer:
Akram's Farm
Akram's farm can make good use of the following short-term financing sources:
1. Akram's farm can use Accounts Payable to provide short-term trade finance when the farm buys farm inputs, equipment, and other supplies on credit. The farm's Accounts Payable can provide interest-free trade loans by allowing the farm to take longer time to settle the suppliers. But, the farm should not miss out on cash discounts - an important source of trade finance.
2. Akram's farm can generate finances by ensuring early collections of the Accounts Receivable. Akram's farm can also go ahead and borrow on the accounts receivable through short-term bank loans guaranteed on the accounts. The farm can also factor the accounts receivable by selling them to factoring and finance houses for less.
Explanation:
Akram's farm is still a small farm that is not yet formed as a company. The immediate concentration is growing the entity and starting the processes for changing its corporate status so that it can take advantage of the sources of finance available to companies.
The income statements for Federer Sports Apparel for 2022 and 2021 are presented below.
FEDERER SPORTS APPAR
Income Statement
For the Years Ended December 31
Year Increase Decrease
2019 2018 Amount %
Net sales 18,800,000 15,500,000
Cost of goods 13,200,000 7,000,000
Gross prof 5,600,000 8,500,000
Operating expenses 1,600,000 1,200,000
Depreciation expense 1,000,000 1,000,000
Inventory write-down 200,000 0
Loss (litigation) 1,500,000 300,000
Required:
Prepare a horizontal analysis for 2022 using 2021 as the base year.
Answers
Answer and Explanation:
The Preparation of horizontal analysis for 2022 using 2021 as the base year is prepared with the help of a spreadsheet.
Horizontal analysis is a method for the analysis of financial statements that indicates fluctuations in the amount of the related products over a period of time. It is a valuable instrument for determining trend situations.
So, with the help of the spreadsheet, we will be able to find the net income by using the formulas.
The horizontal analysis of the Income Statement is the analytical form of preparing the income statement to determine the accurate amount and percentage of changes in each item of the income statement.
The horizontal income statement is attached below.
The horizontal analysis determines the change in the amounts of each account. The percentage change is the division of a change in amount by the base amount of the base year.
In this case, the base year was 2021.
Therefore, the change in amounts will be determined based upon the figures of the base year.
To know more about horizontal analysis, refer to the link:
https://brainly.com/question/14698328
Net income (in millions) $150 Shares outstanding (in millions) 300 Stock price $30.00 What is the price-earnings ratio (to the nearest whole number)?
Answers
Answer:
60
Explanation:
price-earnings ratio = price / earnings per share
earnings per share = net income / shares outstanding = $150 / 300 = $0.50
$30 / $0.50 = 60
The following data pertain to operations concerning the product for the last month: Actual hours worked 8,100 hours Actual total labor cost $119,880 Actual output 800 units What is the labor rate variance for the month?
Answers
Answer:
Instructions are below.
Explanation:
Giving the following information:
We weren't provided with enough information to solve the requirement. But, I will provide an example and the formula to guide an answer.
For example:
Standard rate per hour= $15
Actual hours worked 8,100 hours
Actual total labor cost $119,880
To calculate the direct labor rate variance, we need to use the following formula:
Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity
Actual rate= 119,880/8,100= $14.8
Direct labor rate variance= (15 - 14.8)*8,100
Direct labor rate variance= $1,620 favorable
During the year, Bramble Corp. made an entry to write off a $31400 uncollectible account. Before this entry was made, the balance in accounts receivable was $413000 and the balance in the allowance account was $34500. The accounts receivable amount expected to be collected after the write-off entry was
Answers
Answer:
The accounts receivable amount expected to be collected after the write-off entry is $378,500
Explanation:
Allowance for bad debt = $34,500
Bad debt written off = $31,400
Credit balance in allowance for bad debts = Allowance for bad debt - Bad debt written off
= $34,500 - $31,400
= $3,100
The balance in receivables account = ($413,000 - $31,400) - ($34,500 - $31,400)
= $381,600 - $3,100
= $378,500
Midhun uses internet to deposit 1 poin
and withdraw money from his
bank. Name this type of
banking.
e-commerce
O e-banking
O e-payment
O e-lending
Answers
Answer:
e banking
Explanation:
it is called e banking ( electronic), because Midhun is using both deposit and withdraw money through internet
What economic benefit has the debt reschedule for developing countries?
Answers
Answer:
The main economic benefit that debt rescheduling has for developing countries is that it changes principal and interest payments to more favorable conditions.
This means that after the reschedule, developing countries will have to put less resources into the payments of public debt, which allows them to have more resources available for other public investments like education, healthcare, and infraestructure.
Which of the following ratios indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit?
A. Margin of safety ratio
B. Costs and expenses ratio
C. Profit ratio
Answers
Answer:
The correct answer is the option A: Margin of safety ratio.
Explanation:
To begin with, the name of "Margin of Safety", in the field of business and accounting, is refered to a ratio whose main purpose is to establish the point in where the company knows that it has to sale obligately due to the fact that at that point the company can be sure that they have covered the fixed costs of it and after that point every sale will became a profit for the company. So that is why that this ratio indicates the percentage of each sales dollar that is available to cover those costs.
Ford Motor Company is discussing new ways to recapitalize the firm and raise additional capital. Its current capital structure has a % weight in equity, % in preferred stock, and % in debt. The cost of equity capital is %, the cost of preferred stock is %, and the pretax cost of debt is %. What is the weighted average cost of capital for Ford if its marginal tax rate is %?
Answers
Complete Question:
Ford Motor Company is discussing new ways to recapitalize the firm and raise additional capital. Its current capital structure has a 10% weight in equity, 25% in preferred stock, and 65% in debt. The cost of equity capital is 17%, the cost of preferred stock is 11%, and the pretax cost of debt is 9%. What is the weighted average cost of capital for Ford if its marginal tax rate is 40%?
Answer:
7.96%
Explanation:
We can calculate WACC using the formula:
WACC = Cost of equity * Equity %age / 100% +
After Tax Cost of Debt * Debt %age / 100% +
Cost of Preferred Stock * Preferred Stock %age / 100%
Here,
Cost of equity is 17%
Cost of preferred stock is 11%
Post tax cost of debt = Pre-Tax cost * (1 - Tax rate)
This implies,
Post tax cost of debt = 9% * (1 - 40%) = 5.4%
Equity weight is 10% weight in equity
Preferred stock weight is 25%
Debt Weight is 65%
By putting value in the formula given in the attachment, we have:
WACC = 17% * (10% / 100%) + 11% * (25% / 100%) + 5.4% * (65% / 100%)
WACC = 1.7% + 2.75% + 3.51%
WACC = 7.96%
The following data were taken from the records of Clarkson Company for the fiscal year ended June 30, 2020.
Raw Materials Inventory 7/1/19 $48,100
Factory Insurance $4,700
Raw Materials Inventory 6/30/20 39,700
Factory Machinery Depreciation 16,100
Finished Goods Inventory 7/1/19 96,100
Factory Utilities 28,700
Finished Goods Inventory 6/30/20 19,900
Office Utilities Expense 8,550
Work in Process Inventory 7/1/19 19,900
Sales Revenue 555,000
Work in Process Inventory 6/30/20 19,900
Sales Discounts 4,300
Direct Labor 139,350
Plant Manager’s Salary 61,100
Indirect Labor 24,560
Factory Property Taxes 9,610
Accounts Receivable 27,100
Factory Repairs 1,500
Raw Materials Purchases 96,500
Cash 32,100
Required:
Prepare an income statement through gross profit.
Answers
Answer:
Clarkson Company
Income statement for the year ended June 30, 2020
Sales Revenue $555,000
Less Costs of Goods Sold :
Opening Finished Goods Inventory $96,100
Add Cost of Goods Manufactured $390,520
Less Closing Finished Goods Inventory ($19,900) ($466,720)
Gross Profit $83,280
Explanation:
First prepare a Schedule of Manufacturing Costs to determine the Cost of Goods Manufactured.
Schedule of Manufacturing Costs
Factory Insurance $4,700
Raw Materials ($48,100 + $96,500 - $39,700) $104,900
Factory Machinery Depreciation $16,100
Factory Utilities $28,700
Direct Labor $139,350
Plant Manager’s Salary $61,100
Indirect Labor $24,560
Factory Property Taxes $9,610
Factory Repairs $1,500
Add Opening Work In Process Inventory $19,900
Less Closing Work In Process Inventory ($19,900)
Cost of Goods Manufactured $390,520
Japanese tourists come to experience the magic of Disney World and other attractions around Orlando, Florida. These tourists are:___________
[A] contributing to the United States’ deficit balance of payments.
[B] helping increase the balance of payments for Japan.
[C] exporting products and services back to Japan.
[D] further decreasing the United States’ balance of payments.
[E] helping the United States’ balance of payments.
Answers
Answer:
Option E, helping the United States’ balance of payments, is the right answer.
Explanation:
Option “E” is the correct answer because the balance of payment records all the transactions that occurred between the home country and the rest of the word. Therefore, if the foreign tourist spends in the country that means they are helping the balance of payment. This will increase the country’s surplus and the ability to pay the expenses because tourism is helping to generate revenue.
If the marginal propensity to consume equals , the tax rate equals , and the marginal propensity to import equals , what is the value of the government purchases multiplier?
Answers
Answer: 1.90
Explanation:
The Government Purchases Multiplier given the variables is given by the expression;
Government Purchases Multiplier = [tex]\frac{1}{1 -(MPC ( 1 -T) - MPI)}[/tex]
Where MPC is the Marginal Propensity to Consume,
T is tax rate and,
MPI is the Marginal Propensity to Import
Government Purchases Multiplier = [tex]\frac{1}{1 -(MPC ( 1 -T) - MPI)}[/tex]
= [tex]\frac{1}{1 -(0.9 ( 1 -0.25) - 0.2)}[/tex]
= [tex]\frac{1}{ 1 - 0.475}[/tex]
= 1.90
Poulter Corporation will pay a dividend of $4.25 per share next year. The company pledges to increase its dividend by 6.75 percent per year, indefinitely. If you require a return of 10 percent on your investment, how much will you pay for the company’s stock today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answers
Answer:
Current price of stock = $130.76(Approx).
Explanation:
Given:
Dividend paid = $4.25
Required return of return = 10%
Growth rate = 6.75%
Find:
Current price of stock = ?
Computation:
Current price of stock = D1 / (Required return of return - Growth rate)
Current price of stock = 4.25 / (0.1 - 0.0675)
Current price of stock = 4.25 / 0.0325
Current price of stock = $130.76(Approx).
Which of the costs below would be included in the recorded cost of merchandise inventory? (Check all that apply.) Storage costs Invoice cost Wages costs Insurance costs Selling costs
Answers
Answer: Storage costs; Invoice costs; Insurance costs.
Explanation:
The costs that would be included in the recorded cost of merchandise inventory are the storage costs, the invoice cost and the insurance costs.
It should be noted that merchandise inventory has to do with the goods that have been gotten from suppliers by a distributor in order to sell them to third parties.
A company had the following purchases during its first year of operations: Purchases January: 18 units at $128 February: 28 units at $138 May: 23 units at $148 September: 20 units at $158 November: 18 units at $168 On December 31, there were 58 units remaining in ending inventory. These 58 units consisted of 10 from January, 12 from February, 14 from May, 12 from September, and 10 from November. Using the specific identification method, what is the cost of the ending inventory?
Answers
Answer:
$8,584
Explanation:
Cost of ending inventory can be calculated by multiplying the remaining units of the given month by their purchase cost in the following month
DATA
Total remaining units n ending inventory = 58 units
10 from January at $128
12 from February at $138
14 from May at $148
12 from September at $158
10 from November at $168
Calculation
January = 10 x $128 = $1,280
February = 12 x $138 = $1,656
May = 14 x $148 = $2,072
September = 12 x $158 = $1,896
November = 10 x $168 = $1,680
Cost of ending inventory = $8,584
The following data were reported by a corporation: Authorized shares 37,000 Issued shares 32,000 Treasury shares 12,000 The number of outstanding shares is: Multiple Choice 37,000. 32,000. 25,000.
Answers
Answer:
20,000
Explanation:
Outstanding shares = Issued shares - Treasury shares
32,000 - 12,000 = 20,000
Shares is a method through which firms raise capital.
Authorised shares are the maximum number of shares a company can issue to investors
Outstanding shares are the total number of shares sold to investors
Treasury shares are shares that have been issued and later repurchased by the company
Issued shares are the shares that a company issues
A company plans to invest X at the beginning of each month in a zero-coupon bond in order to accumulate 100,000 at the end of six months. The price of each bond as a percentage of redemption value is given in the following chart:1 2 3 4 5 6 ; 99% 98% 97% 96% 95% 94%; Calculate X given that the bond prices will not change during the six-month period.
Answers
Answer:
x = $16,078.46
Explanation:
$100,000 = 1.0101x + 1.0204x + 1.0309x + 1.0417x + 1.0526x + 1.0638x
$100,000 = 6.2195x
x = $100,000 / 6.2195 = $16,078.46
month investment value at end of month 6
1 $16,078.46 $17,104.74
2 $16,078.46 $16,924.68
3 $16,078.46 $16,748.39
4 $16,078.46 $16,575.73
5 $16,078.46 $16,406.59
6 $16,078.46 $16,240.87
total $96,470.76 $100,001*
*the extra $1 is due to rounding errors.
An invoice of $600 for merchandise purchased is showing 3/15, n/30 as terms of credit. If the invoice is paid on or before the fifteenth day after the invoice date, the amount to be paid is ________.
Answers
Answer:
Amount Payable or paid = $582
Explanation:
The terms of purchase state that the buyer will be entitled to a 3% cash discount if the payment for the purchases is made within 15 days of the purchase or invoice date.
Thus, if the payment is made on or within the fifteen days of invoice date, the cash discount that will be received is,
Discount = 600 * 0.03 = $18
So, the amount that will be payable for the merchandise will be,
Amount Payable or paid = 600 - 18 = $582
A company releases a? five-year bond with a face value of? $1000 and coupons paid semiannually. If market interest rates imply a YTM of 8%, which of the following coupon rates will cause the bond to be issued at a? premium?
A. 6%
B.10%
C. 8%
D. 5%
Answers
Answer: B.10%
Explanation:
For a bond to be issued at a premium, the Coupon rate needs to be higher than the current Market Yield to Maturity as this will cause the price of the bond to be higher than Par signifying that the bond is an attractive one.
If the Coupon rate is equal to the YTM then the bond will trade at Par.
If the Coupon rate is less than the YTM then the bond will trade at a discount.
Only 10% of the coupon rate will allow the bond by issued at a premium.
The coupon rate of a a bond refers to the amount of interest income earned each year based on the face value.
The yield to maturity of a band refers to the total estimated return if the bond is held until maturity.
When coupon rate is equal to YTM at issue, then, bond is issued at par value.When coupon rate is lower than YTM at issue, then, bond is issued at a discount.When coupon rate is higher than YTM at issue, then, bond is issued at a premium.
Therefore, the Option B is correct because only 10% of the coupon rate will allow the bond by issued at a premium
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Businesses should test data storage procedures periodically to ensure that backed up data is correct and complete, and that the storage media or cloud-based storage service works properly.
A) True
B) False
Answers
Answer:
True
Explanation:
Data security is very important for a business. The business generates, Collects and processes the available data, which incur huge expenses. To protect this data management should place some internal control within the organization. Backing up the data is also a control to protect the organization's data.
The test of storage procedure should be in place in order to strength of internal control. So, it is true to test data storage procedures periodically to ensure that backed up data is correct and complete, and that the storage media or cloud-based storage service works properly.
You have been given the following return information for a mutual fund, the market index, and the risk-free rate. You also know that the return correlation between the fund and the market is 0.97.
Year Fund Market Risk-Free
2008 -15.2% -24.5% 1%
2009 25.1 19.5 3
2010 12.4 9.4 2
2011 6.2 7.6 4
2012 -1.2 -2.2 2
What are the Sharpe and Treynor ratios for the fund?
Answers
Answer:
Sharpe ratio = 0.20
Treynor ratio = –0.005
Explanation:
Note: See the attached excel file for the calculations of average rate of returns, standard deviations and beta used in the calculation below.
a. Calculation of Sharpe ratio
Sharpe ratio refers to a investment measurement that employed to measure the an investment actual that has been adjusted for the risk associated with the investment.
Sharpe ratio can be calculated using the following formula:
Sharpe ratio = (Average fund rate - Average Risk Free rate) / Standard deviation of fund rate = (5.46% - 2.40%) / 15.05% = 0.20
a. Calculation of Treynor ratio
Treynor ratio refers to investment measurement that is calculated to show the risk of certain investments after the volatility of the market has been taking into consideration.
Treynor ratio can be calculated using the following formula:
Treynor ratio = (Average market return rate - Average Risk Free rate) / Beta = (1.96% - 2.40%) / 87.53% = –0.005
Your bank pays 4% interest annually. You have $2,500 invested in the bank. How long will it take for your funds to double
Answers
Answer:
17.69 years
Explanation:
The formula to calculate the number of periods of time is:
n=ln(FV/PV)/ln(1+r)
n= number of periods of time
FV= future value=$2,500*2=$5,000
PV= present value=$2,500
r=interest rate=0.04
Now, you can replace the values in the formula:
n=ln(5,000/2,500)/ln(1+0.04)
n=ln2/ln1.04
n=0.69/0.039
n=17.69
According to this, the answer is that it will take 17.69 years for your funds to double.
According to the kinked demand curve theory, the behavior of firms in an oligopoly creates a demand curve that is ________ at prices above the cartel price and ________ at prices below the cartel price.
Answers
Answer:
According to the kinked demand curve theory, this behavior creates a demand curve that is more elastic at prices above the cartel price and more inelastic at prices below the cartel price.
Explanation:
Oligopoly is a market structure with a small number of firms, none of which can keep the from from having significant influence in the same specialization they indulge in.
The kinked demand curve theory means that the response to a price increase is less than the response to a price decrease of the Olipolist in the market
Income statement data for Boone Company for two recent years ended December 31, are as follows:
Current Year Previous Year
Sales $396,000 $330,000
Cost of goods sold 330,400 280,000
Gross profit $65,600 $50,000
Selling expenses $17,600 $16,000
Administrative expenses 16,520 14,000
Total operating expenses $34,120 $30,000
Income before income tax $31,480 $20,000
Income tax expenses 12,600 8,000
Net income $18,880 $12,000
a. Prepare a comparative income statement with horizontal analysis, indicating the increase (decrease) for the current year when compared with the previous year. If required, round to one decimal place.
Boone Company
Comparative Income Statement
For the Years Ended December 31
Current year Amount Previous year Amount Increase (Decrease) Amount Increase (Decrease) Percent
Sales $396,000 $330,000 $ %
Cost of goods sold 330,400 280,000 %
Gross profit $65,600 $50,000 $ %
Selling expenses 17,600 16,000 %
Administrative expenses 16,520 14,000 %
Total operating expenses $34,120 $30,000 $ %
Income before income tax $31,480 $20,000 $ %
Income tax expense 12,600 8,000 %
Net income $18,880 $12,000 $ %
b. The net income for Boone Company increased by 57.3% between years. This increase was the combined result of an in sales of 20% and percentage in cost of goods sold. The cost of goods sold increased at a rate than the increase in sales, thus causing the percentage increase in gross profit to be than the percentage increase in sales.
Answers
Answer:
a. Boone Company
Statement showing comparative income statement
Particulars Current (A) Previous(B) CHANGE PERCENT
Year Year (C=A-B) (C/B*100)
Sales $396,000 $330,000 $66,000 20%
Cost of goods $330,400 $280,000 $50,400 18%
sold
Gross profit $65,600 $50,000 $15,600 31.2%
Selling $17,600 $16,000 $1,600 10%
expenses
Administrative $16,520 $14,000 $2,520 18%
expenses
Total operating $34,120 $30,000 $4,120 13.73%
expenses
Income before $31,480 $20,000 $11,480 57.4%
income tax
Income tax $12,600 $8,000 $4,600 57.5%
expenses
Net income $18,880 $12,000 $6,880 57.3%
b. The cost of goods sold increased at a rate LOWER than the increase in sales, thus causing the percentage increase in gross profit to be GREATER than the percentage increase in sales.
balance sheet reports assets of $6900000 and liabilities of $2700000. All of Ivanhoe’s assets’ book values approximate their fair value, except for land, which has a fair value that is $410000 greater than its book value. On 12/31/21, Oriole Corporation paid $7030000 to acquire Ivanhoe. What amount of goodwill should Oriole record as a result of this purchase?
Answers
Answer: $2,420,000
Explanation:
Goodwill is the amount over the fair value of a company that it is purchased for.
Goodwill = Acquisition price - Net Assets
Net Assets = Assets - Liabilities
= (6,900,000 + 410,000) - 2,700,000
= $4,610,000
Goodwill = 7,030,000 - 4,610,000
= $2,420,000
