On 31st March, 2016, ledger balances taken from the books of Menon Ltd. were as follows : Cr. Balances Dr. Balances Share Capital : Authorised & Issued : 5,000 Equity Shares of 100 each fully paid Surplus Account Bank Overdraft Creditors Provision for Taxation Proposed Dividend Land and Buildings Plant ånd Machinery Stock Sundry Debtors 2,20,000 95,000 3,50,000 1,55,000 5,00,000 1,03,000 20,000 77,000 45,000 75,000 8,20,000 8,20,000 Net profits of the company, after deducting all working charges and providing for depreciation and taxation, were as under : Year ended 31* March : 2012 $ 85,000 ; 2013 $ 96,000; 2014 $ 90,000 ; 2015 $ 1,00,000; 2016 $ 95,000. On 31* March, 2016, Land and Buildings were valued at $ 2,50,000 and Plant and Machinery at $ 1,50,000. In view of the nature of the business, it is considered that 10% is a reasonable return on tangible capital. Prepare a valuation of the company's shares after taking into account the revised values of fixed assets and your own valuation of goodwill based on five years' purchase of the super profits based on the average profit of the last five years.
On 31st March, 2016, ledger balances taken from the books of Menon Ltd. were as follows : Cr. Balances Dr. Balances Share Capital : Authorised & Issued : 5,000 Equity Shares of 100 each fully paid Surplus Account Bank Overdraft Creditors Provision for Taxation Proposed Dividend Land and Buildings Plant ånd Machinery Stock Sundry Debtors 2,20,000 95,000 3,50,000 1,55,000 5,00,000 1,03,000 20,000 77,000 45,000 75,000 8,20,000 8,20,000 Net profits of the company, after deducting all working charges and providing for depreciation and taxation, were as under : Year ended 31* March : 2012 $ 85,000 ; 2013 $ 96,000; 2014 $ 90,000 ; 2015 $ 1,00,000; 2016 $ 95,000. On 31* March, 2016, Land and Buildings were valued at $ 2,50,000 and Plant and Machinery at $ 1,50,000. In view of the nature of the business, it is considered that 10% is a reasonable return on tangible capital. Prepare a valuation of the company's shares after taking into account the revised values of fixed assets and your own valuation of goodwill based on five years' purchase of the super profits based on the average profit of the last five years.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter10: Stockholder's Equity
Section: Chapter Questions
Problem 94.1C
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
Survey of Accounting (Accounting I)
Accounting
ISBN:
9781305961883
Author:
Carl Warren
Publisher:
Cengage Learning
Financial Accounting: The Impact on Decision Make…
Accounting
ISBN:
9781305654174
Author:
Gary A. Porter, Curtis L. Norton
Publisher:
Cengage Learning
Financial Accounting
Accounting
ISBN:
9781305088436
Author:
Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:
Cengage Learning