In which of the following situations would Martinez Indus-tries include goodwill in its balance sheet? a. The fair market value of Martinez’s net identifiableassets amounts to $2,000,000. Normal earnings for thisindustry are 15 percent of net identifiable assets. Netincome for the past five years has averaged $390,000.b. Martinez spent $800,000 during the current year for research and development for a new product that prom-ises to generate substantial revenue for at least 10 years. c. Martinez acquired Baxter Electronics at a price in excess ofthe fair market value of Baxter’s net identifiable assets. d. A buyer wishing to purchase Martinez’s entire opera-tion has offered a price in excess of the fair market value of the company’s net identifiable assets.
In which of the following situations would Martinez Indus-
tries include
a. The fair market value of Martinez’s net identifiable
assets amounts to $2,000,000. Normal earnings for this
industry are 15 percent of net identifiable assets. Net
income for the past five years has averaged $390,000.
b. Martinez spent $800,000 during the current year for
research and development for a new product that prom-
ises to generate substantial revenue for at least 10 years.
c. Martinez acquired Baxter Electronics at a price in excess of
the fair market value of Baxter’s net identifiable assets.
d. A buyer wishing to purchase Martinez’s entire opera-
tion has offered a price in excess of the fair market
value of the company’s net identifiable assets.
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