Explore BrainMass

Explore BrainMass

    Amount to pay for business

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    O'Henry's Data Services Unadjusted Trial Balance November 30, 20XX

    Cash.................................... $9,700
    Accounts receivable........................... 7,900
    Prepaid expenses............ 2,600
    Furniture, fixtures, & equipment 151,300
    Accumulated depreciation $15,600
    Accounts payable............ 3,800
    Salary payable..................
    Unearned service revenue 6,700
    Benjamin O'Henry, capital 137,400
    Benjamin O'Henry, withdrawals 2,000
    Service revenue............ 14,300
    Rent expense...............
    Salary expense............ 3,400
    Utilities expense......... 900
    Depreciation expense
    Supplies expense......
    Total................................................. $177,800 $177,800

    Revenues and expenses vary little from month to month, and November is a typical month. Your investigation reveals that the unadjusted trial balance does not include the effects of monthly revenues of $2,100 and monthly expenses totaling $2,750. If you were to buy O'Henry's Data Services, you would hire a manager who would require a monthly salary of $3,000.

    The most you would pay for the business is 20 times the monthly net income you could expect to earn from it. Compute this possible price. The least O'Henry will take for the business is his ending capital. Compute this amount. Under these conditions, how much should you offer O'Henry? Give your reason.

    © BrainMass Inc. brainmass.com June 3, 2020, 11:56 pm ad1c9bdddf
    https://brainmass.com/business/accounting/amount-to-pay-for-business-309213

    Solution Summary

    The solution explains how to calculate the amount to be paid for the business

    $2.19

    ADVERTISEMENT