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    Benjamin O'Henry has owned and operated O'Henry's Data Servi

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    Benjamin O'Henry has owned and operated O'Henry's Data Services since its beginning ten years ago. From all appearances, the business has prospered. In the past few years, you have become friends with O'Henry and his wife. Recently, O'Henry mentioned that he has lost his zest for the business and would consider selling it for the right price. You are interested in buying this business, and you obtain its most recent monthly unadjusted trial balance which follows:

    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.

    Please with references

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    Solution Preview

    Please see the attached file.

    Income Statement for Benjamin O'Henry
    After Adjustment Comment
    Sales Revenue 14,300 16,400 adjusted for unrecorded revenues of $2,100
    Salary Expense 3,400
    Utilities Expense 900
    Total Expense 4,300 7,050 adjusted for the unrecorded expenses of $2,750
    Net Income 10,000 9,350

    Income Statement for Buyer

    Sales Revenue 16,400
    Salary Expense 3,400
    Utilities Expense ...

    Solution Summary

    The solution provides detailed instructions and explanations for the problem.

    $2.19

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