Answer:
B) plan 1 : worker earning y = x - 0.14 , unit labor = [tex]\frac{x-(0.14)}{x}[/tex]
plan 2 : worker earning y = 0.5x + 0.5, unit labor = (0.5x + 0.5) / x
C) At 128%
D ) plan D IS PREFERABLE
Explanation:
In the first case Benefits are split : 30% to worker , 70% to company ( up to 120% ) performance
In the second case benefits 50% go to the worker and 50% go the company
B) The equations for worker earnings and normalized unit labor costs for each scheme
Plan 1 :
y ( percentage earning of worker ) = 1
unit labor cost = Y / 1
y = 0 - 30
unit labor = 0.3 / x
y = x - 0.14 therefore unit labor = [tex]\frac{x-(0.14)}{x}[/tex]
plan 2 :
y ( percentage earning of worker ) = 1, y = 0.5x + 0.5
unit labor cost : Y / 1 = (0.5x + 0.5) / x
C ) The point at which the two plans break even
0.5x + 0.5 = x - 0.14
0.5 + 0.14 = x - 0.5x
0.64 = x(1 - 0.5 )
x = 0.64 / 0.5 = 1.28 = 128%
D) The company would prefer plan 1
Evaluate the Ritz-Carlton business model and associate key quality characteristics in the operations of a hotel set-up process.
Answer:
Ritz Carlton is luxury hotel chain of America. The company has 101 luxury hotel in more than 30 countries of the world. The success of Ritz Carlton is mainly because they keep the comfort of their guests as their highest priority. Their mission statement clearly states that comfort and genuine care of their guests is utmost important to them.
Explanation:
Their business model focuses entirely on their customers. Ritz Carlton has created its leading brand by providing great ambiance to the visitors and its guest. One can dream of staying at such luxury hotel. They are famous for their hospitality of their guests. The hotel management believes on total quality management. It has set highest standard for themselves and strive to meet them by providing better and better service to its guests.
A food manufacturer reports the following for two of its divisions for a recent year.
($millions) Beverage Division Cheese Division
Invested assets, beginning $ 2,662 $ 4,455
Invested assets, ending 2,593 4,400
Sales 2,681 3,925
Operating income 349 634
1. Compute return on investment.
2. Compute profit margin.
3. Compute investment turnover for the year.A food manufacturer reports the following for two of its divisions for a recent year.
Answer and Explanation:
1. Return on investment is
= Operating Income ÷ Average invested Assets
here, average invested assets is
= (Invested assets, beginning + Invested assets, ending) ÷ 2
For Beverage Division
= $349 ÷ (($2,662 + $2,593) ÷ 2)
= $349 ÷ $2,628
= 13.28%
For Cheese Division
= $634 ÷ (($4,455 + $4,400) ÷ 2)
= $634 ÷ $4,428
= 14.32%
2. Profit margin = (Operating income ÷ sales) × 100
For Beverage Division
= ($349 ÷ $2,681) × 100
= 13.02%
For Cheese Division
= ($634 ÷ $3,925) × 100
= 16.15%
3. Investment turnover = Sales ÷ Average Operating Assets
For Beverage Division
= $2,681 ÷ (($2,662 + $2,593) ÷ 2)
= $2,681 ÷ $2,628
= 1.02 times
For Cheese Division, it would be
= $3,925 ÷ (($4,455 + $4,400) ÷ 2)
= $3,925 ÷ $4,428
= 0.89 times
At an output level of 53,000 units, you calculate that the degree of operating leverage is 3.21. If output rises to 57,000 units, what will the percentage change in operating cash flow be? Suppose fixed costs are $175,000. What is the operating cash flow at 46,000 units? The degree of operating leverage? that the degree of operating
Answer:
If output rises to 57,000 units, what will the percentage change in operating cash flow be?
24.23%What is the operating cash flow at 46,000 units?
$45,613.84The degree of operating leverage (at 46,000 units)?
4.84Explanation:
degree of operating leverage = [quantity x (price - variable costs)] / {[quantity x (price - variable costs)] - fixed costs}
degree of operating leverage x {[quantity x (price - variable costs)] - fixed costs} = [quantity x (price - variable costs)]
3.21 x {[53000 x (contribution margin)] - fixed costs} = [53000 x (contribution margin)]
(3.21 x 53000 x contribution margin) - (3.21 x 175000) = 53000 x contribution margin
let C = contribution margin
170130C - 561750 = 53000C
117130C = 561750
C = 561750 / 117130 = 4.795953
operating cash flow (at 53,000) = (53,000 x $4.795953) - $175,000 = $79,185.52
operating cash flow (at 57,000) = (57,000 x $4.795953) - $175,000 = $98,369.32
% change = ($98,369.32 - $79,185.52) / $79,185.52 = 24.23%
operating cash flow (at 46,000) = (46,000 x $4.795953) - $175,000 = $45,613.84
% change in operating cash flows = ($45,613.84 - $79,185.52) / $79,185.52 = -43.4%
% change in sales = (46,000 - 53,000) / 53,000 = -13.21
degree of operating leverage = $220,613.84 / $45,613.74 = 4.84
Match each term to the correct defintion.
Terms:
a. Benchmarking
b. Efficiency variance
c. Cost variance
d. Standard cost
Definitions:
1. Measures whether the quantity of materials or labor used to make the actual number of outputs is within the standard allowed for the number of outputs.
2. Uses standards based on best practice.
3. Measures how well the business keeps unit costs of materials and labor inputs within standards.
4. A price, cost, or quantity that is expected under normal conditions.
Answer:
A = 2
B = 1
C = 3
D = 4
Explanation:
Gabriel, Harris and Ida are members of Jeweled Watches, LLC. What are their options with respect to the management of their firm?
Answer:
They could be a Member-managed Limited Liability Company or a Manager-managed Limited Liability Company.
Explanation:
A Limited Liability Company is usually run by two or more partners. In managing this type of company, the members might choose to manage the company themselves. This is known as a member-managed Limited Liability Company. In such cases, if any member makes a decision in behalf of the business, with his signature appended to it, such a decision is considered legally binding on all other members of the company. Every member also has a say in the company's decision-making.
If they choose to be a manager-managed Limited Liability Company, they can appoint one or more non-members to manage the company for them. They do not interfere with how the manager chooses to run the company. They can still make important decisions but this is quite limited. However, they can choose to remove the manager/managers as they will.
A one-month summary of manufacturing costs for Rapid Routers Company follows.
Direct materials $40,000
Direct labour 20,000
Material handling costs 1,500
Product inspection and rework 2,000
Materials purchasing and inspection 500
Routine maintenance and equipment servicing 1,200
Repair of equipment 300
Required:
Classify each cost as value-added or non-value-added
Answer:
Cost Classification
Direct materials Value added
Direct labor Value added
Material handling costs Non-value added
Product inspection and rework Non-value added
Materials purchasing and inspection Value added
Routine maintenance and equipment Non-value added
servicing
Repair of equipment Non-value added
Chester currently has $17,624 (000) in cash and management has decided to issue stocks and bonds worth an additional $8,000 (000). Assuming that cash from operations will be the same for each of the following activities, which activity exposes this company to the most risk of being issued an emergency loan?
a) purchasing $18,000 (000) worth of plant and equiptment
b) liquidate the new inventory
c) retiring the oldest bond
d) a $5 dividend
Answer: a) purchasing $18,000 (000) worth of plant and equipment
Explanation:
Of the 4 options listed, liquidating the new inventory would lead to a cash inflow and so is not going to lead to an emergency loan.
Retiring the oldest bond is something that would probably have been budgeted for so it will be less probable to cause Chester to seek emergency funding.
The activity that poses the greatest threat to Chester in terms of loan solicitation would be the purchase of plant and equipment. This would have less chance of being budgeted for and is a significant amount to leave the company which is even larger than the company's current cash amount. It has a higher chance of causing Chester to seek emergency loan funding.
3. There a number of market entry strategies that businesses use in entering into markets outside their countries. a) Distinguish between the use of Franchising and Joint Venture as modes of entry into other countries by global businesses. b) What are the respective advantages and disadvantages of both strategies?
Answer:
a) Distinguish between the use of Franchising and Joint Venture as modes of entry into other countries by global businesses.
Franchising consists in the licensing of aspects of production and intellectual property to a another party: the franchise.
A Joint Venture is a business union between two or more parties, in which they split profit as well as costs and responsabilities.
b) What are the respective advantages and disadvantages of both strategies?
Franchising can be a quicker way to expand into foreign markets. The flexibility of the method, and the lower capital requirements are the reason why. This can be seen in the success that American fast-food brands have had using this method to expand in global markets.
A Joint-Venture can be more difficult to use for market expansion, however, it can be more profitable, because the profit will not be split among as many parties as in franchising, and more importantly, the firm maintains a higher control of the operation.
The Whistling Straits Corporation needs to raise $74 million to finance its expansion into new markets. The company will sell new shares of equity via a general cash offering to raise the needed funds. The offer price is $45 per share and the company's underwriters charge a spread of 6 percent. If the SEC filing fee and associated administrative expenses of the offering are $825,000, how many shares need to be sold? (Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to the nearest whole number, e.g., 1,234,567.)
Answer:
1,768,913 new stocks
Explanation:
the company needs to raise amount needed to finance expansion plus SEC's filing and administrative fees = $74,000,000 + $825,000 = $74,825,000
net amount received per stock issued = stock price x (1 - underwriting fee) = $45 x (1 - 6%) = $42.30 per stock
the company needs to issue = $74,825,000 / $42.30 per stock = 1,768,912.53 = 1,768,913 new stocks
The Hirt & Block mutual fund has assets of $147 million, liabilities of $7 million and 7 million shares outstanding. The shares trade at $21.60 per share. What is the percentage load fee?
Answer: 8%
Explanation:
The load fee would be the excess percentage amount charged on the share over the Net Asset Value per share.
= [tex]\frac{Trading price per share - Net Asset Value per share}{ Net Asset Value per share}[/tex]
Net Asset value Per share = (Assets - Liabilities) / Number of shares
= (147 - 7) / 7
= $20
Load fee
= [tex]\frac{Trading price per share - Net Asset Value per share}{ Net Asset Value per share}[/tex]
= [tex]\frac{21.60 - 20}{20}[/tex]
= 8%
Open space arrangements in workstations increase communication and potentially decrease noise, distractions, and loss of privacy.
a. true
b. false
Answer:
false
Explanation:
while open space arrangement increases communication, it also increases noise, distractions, and loss of privacy.
Answer:
b. False
Explanation:
Although open space arrangement in a workstation increases communication , yet such communication would eventually lead to an increase noise, distractions and loss of privacy. This is the reason why modern organizations preferred the use of cubicle in demarcating spaces allocated to their employees.
The advantage of using cubicle as demarcation is that there will be less noise and distractions hence leads to increase in productivity . An employee would also have his or her privacy unlike an open space arrangement.
According to the CAPM, what is the market risk premium given an expected return on a security of 15.8%, a stock beta of 1.1, and a risk-free interest rate of 7%? Multiple Choice 7.70% 6.05% 7.00% 8.00%
Answer:
The risk premium on market is 8%
Explanation:
The CAPM or Capital Asset Pricing Model is used to calculate the required rate of return on a stock which is the minimum return that is expected or required by the investors to invest in a stock based on its systematic risk as measured by the beta of the stock.
The formula to calculate r under the CAPM is,
r = rRF + Beta * rpM
Where,
rRF is the risk free raterpM is the risk premium on marketTo calculate the risk premium on market, we will input the available values for r, rRF and beta in the equation above.
0.158 = 0.07 + 1.1 * rpM
0.158 - 0.07 = 1.1 * rpM
0.088 / 1.1 = rpM
rpM = 0.08 or 8%
So, the risk premium on market is 8%
TB MC Qu. 7-77 Corbel Corporation has two divisions: Division A and ... Corbel Corporation has two divisions: Division A and Division B. Last month, the company reported a contribution margin of $47,700 for Division A. Division B had a contribution margin ratio of 35% and its sales were $231,000. Net operating income for the company was $27,200 and traceable fixed expenses were $59,700. Corbel Corporation's common fixed expenses were:
Answer:
Corbel Corporation's common fixed cost is $41,650
Explanation:
Division A contribution margin $47,700
Division B contribution Margin $80,850 $128,550
($231,000 * 35%)
Less: Traceable fixed cost $59,700
Operating Income $27,200 ($86,900)
Common fixed cost $41,650
If an investor purchases a bond when its current yield is higher than the coupon rate, then the bond's price will be expected to
Answer:
The answer is: The bond price is expected to Increase over time, reaching par value at maturity
Explanation:
If an investor purchased a bond when the bond current yield-to-maturity is higher than the bond's price, the bond is said to be bought at discount (its price is less than the face value at maturity). With this, the bond price will be expected to Increase over time, reaching par value at maturity.
And when the opposite happens i.e coupon rate higher than the current yield-to-maturity, the bond is said to be bought at premium.
The development manager is required to choose between two projects. Project A has an IRR of 25% and project B has an IRR of 30%. Which of the following statements is correct? A. If she can invest only in one project, the manager will choose project B B. None of the statements above is correct C. If she can invest only in one project, the manager will choose project A D. If she can invest in both projects, the manager will choose both projects A and B
Answer:
A
D
Explanation:
Internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested.
Because the IRR of both projects are positive, both projects are acceptable.
If the manager can only choose one project, she should choose the one with the higher IRR because it would be more profitable.
What is the present value of a perpetuity that pays you annual, end-of-year payments of $950? Use a nominal rate (monthly compounding) of 7.50%.
Answer:
The present value of the perpetuity is $12,242.27.
Explanation:
A perpetuity is an annuity that provide cash flow for an infinite period .Examples are Non -redeemable Preference Share.
Present Value (perpetuity) = Payments ÷ Required Rate
But, first change the 7.50 % nominal rate to Annual Effective Rate to match the period of Cash flow.
Effective Rate = (1 + r / m)^m - 1
= ( 1 + 0.0750 / 12) ^12 -1
= 7.76%
Therefore, Present Value (perpetuity) = $950 ÷ 7.76%
= $12,242.27
At the certain interest rate, present value (PV) is the current value of a future sum of money or stream of cash flows.
The discount rate determines the present value of the cash flows, and the higher the discount rate, the lower the current value of future cash flows.
The present value of the perpetuity is $12,242.27.
A perpetuity is an annuity that payments out during an indefinite period of time. Non-redeemable Preference Share is an example.
Present Value (perpetuity) = [tex]\frac{\text{Payments}}{\text{Required Rate}}[/tex]
However, to match the Working capital period, change a 7.50 percent nominal rate to a Yearly Effective Tax rate.
[tex]\text{Effective Rate} = (1 + \frac{r}{m} )^m - 1= [1 + \frac{0.0750}{12}]^{12} -1= 7.76\%[/tex]
Therefore, Present Value (perpetuity)= [tex]\frac{\$950}{7.76\%} = $12,242.27[/tex]
To know more about the calculations of the present value, refer to the link below:
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What are the benefits and risks associated with social networks? Support your answers with relevant examples
Answer:
Explanation:
There are many benefits as well as risks to social networks. The greatest benefit is that they allow us to connect with individuals from anywhere in the world, at any distance, and in a seconds notice. This is incredibly powerful and opens the door for many opportunities in all types of markets. Social networks also come with risks, since everyone is on it people tend to share all of their information which can cause problems for that individual if it falls into the wrong hands. For example, an individual connects with a family member who lives in Brasil and has casual conversations with that family member every other day. A hacker may be able to access that information and extract all the valuable information needed to steal that individual's identity.
Deming, the proponent of total quality management, argued that management has the responsibility to train employees in new skills.
A. True
B. False
Answer:
Its TRUE
Explanation:
Management should train employees in new skill, where Deming argued that management has the responsibility to train employees in new skills to keep pace with changes in the workplace. In addition, he believed that achieving better quality requires the commitment of everyone in the company.
Terrance needs to comminicate with managers in several different locations regarding a sensitive complex topic. Therefore he should choose the communication medium highest in information richness which would be a:______
a. Voice mail message.
b. Group email.
c. Videoconference.
d. Recorded presentation.
Consider a university that purchases replacement chairs for its classrooms. The purchasing manager knows that the annual demand for replacement chairs is 500. The pricing schedule is as follows: Use the following Excel solution to this quantity discount problem with constant carrying cost. Carrying cost = $ 15 Ordering cost = $ 200 Annual Demand = 500
Quantity Price Q Discount Q Total Cost
100 $130 115.47 115.47 $ 66,732.05
200 $122 115.47 200.00 $ 63,000.00
500 $120 115.47 500.00 $ 63,950.00
What is the inventory ordering cost using the economic order quantity?
A. $1,000
B. $866
C. $500
D. $200
Answer:
b. $866
Explanation:
Annual demand from the question = D = $500
the ordering cost = S = $200
then the cost of carrying H = $15
we have to calculate the economic order quantity
= sqr(2*D*S)/H
= sqr(2 x 500 x 200)/25
= sqr(13333.3333)
this equals 115.469
which is approximately 115.5
next we have to calculate inventory ordering cost
= (D * S)/EOQ
= 200 *500/115.5
= 865.5
When approximated becomes $866
The inventory ordering cost using the economic order quantity is: B. $866.
First step is to calculate the Economic order quantity
Economic order quantity =√(2×D×S)/H
Where:
D=Annual demand=$500
S=Ordering cost=$200
H=Holding cost =$15
Let plug in the formula
Economic order quantity =(2 x 500 x 200)/15
Economic order quantity =√200,000/15
Economic order quantity =√13333.3333
Economic order quantity =115.46
Economic order quantity = 115.5 (Approximately)
Second step is to calculate the inventory ordering cost using this formula
Inventory ordering cost= (Annual demand× Ordering cost )/Economic order quantity
Let plug in the formula
Inventory ordering cost= (200×500)/115.5
Inventory ordering cost=100,000/115.5
Inventory ordering cost=$865.8
Inventory ordering cost=$866 (Approximately)
Inconclusion the inventory ordering cost using the economic order quantity is: B. $866.
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HighLife Corporation has the following information: Average demand = 30 units per day Average lead time = 40 days Item unit cost = $45 for orders of less than 400 units Item unit cost = $40 for orders of 400 units or more Ordering cost = $50 Inventory carrying cost = 15 percent The business year is 300 days. Standard deviation of demand during lead time = 90 Desired service level = 95 percent What is the EOQ if HighLife pays $45/unit? Due to possible differences in rounding, choose the closest answer.\
Answer:
365.15 units
Explanation:
The computation of the economic order quantity is shown below:
[tex]= \sqrt{\frac{2\times \text{Annual demand}\times \text{Ordering cost}}{\text{Carrying cost}}}[/tex]
where,
Annual demand is
= 30 units × 300 days
= 90,000 units
ordering cost is $50
Carrying cost is
= $45 × 15%
= $6.75
Now placing these values to the above formula
So, the economic order quantity is
[tex]= \sqrt{\frac{2\times \text{90,000}\times \text{\$50}}{\text{\$6.75}}}[/tex]
= 365.15 units
We simply applied the above formula so that the EOQ could come
A production department’s beginning inventory cost includes $478,000 of conversion costs. This department incurs an additional $1,047,500 in conversion costs in the month of March. Equivalent units of production for conversion total 770,000 for March.Required:Calculate the cost per equivalent unit of conversion using the weighted-average method.
Answer: $1.98
Explanation:
Equivalent Units of Production are used when the manufacturers have not completely finished their products for the year. This helps them express it in terms of fully manufactured units.
Using the weighted average method, the cost per equivalent unit is;
= [tex]\frac{Beginning inventory cost + Cost of current production}{Equivalent units of production}[/tex]
= [tex]\frac{478,000 + 1,047,500}{770,000}[/tex]
= $1.98
Suppose an item sells for $125 in the United States and for 62,500 pesos in Chile. According to the law of one price, the nominal exchange rate (pesos/dollar) should be ________.
Answer:
$1 = 500 Pesos
1 Pesos = $0.002
Explanation:
$125 = 62,500 Pesos
$1 = 62,500 / 125
$1 = 500 Pesos
$1 = 500 Pesos
1 Pesos = $1 / 500
1 Pesos = $0.002
Which of the following is considered a source of general revenue in the Government-wide Statement of Activities?
A) Charges for Services
B) Operating Grants
C) Sales Tax
Answer:
C) Sales Tax
Explanation:
The Government-wide Statement of Activities shows the revenues and expenses of the government and the general revenues indicate all the taxes, aid received from other governments and earnings from investments. According to that, the answer is that the option that is considered a source of general revenue in the Government-wide Statement of Activities is sales tax.
Busch Company has these obligations at December 31. For each obligation, indicate whether it should be classified as a current liability, long-term liability, or both. (a) A note payable for $100,000 due in 2 years. select a balance sheet section (b) A 10-year mortgage payable of $200,000 payable in ten $20,000 annual payments. select a balance sheet section (c) Interest payable of $15,000 on the mortgage. select a balance sheet section (d) Accounts payable of $60,000. select a balance sheet section
Answer:
Busch Company
Indication of whether the obligation be classified as a current liability, long-term liability, or both:
(a) A note payable for $100,000 due in 2 years. Long-term Liability
(b) A 10-year mortgage payable of $200,000 payable in ten $20,000 annual payments. Both.
Every year, $20,000 would be classified as Current Liability while the remaining balance is long-term liabilities.
(c) Interest payable of $15,000 on the mortgage. Both
If the interest payable is to be settled at the end of the mortgage, then it is classified as only long-term.
(d) Accounts payable of $60,000. Current Liability
Explanation:
Busch's current liabilities are financial obligations that are due for settlement within the next accounting period of 12 months or less.
The long-term liabilities of Busch Company are those financial obligations that are not due for settlement within the next accounting period.
For some long-term liabilities, Busch may settle some part within 12 months. That part that can be settled within the accounting period are classified as current while the other parts are non-current.
You purchased a share of stock for $120. One year later you received $1.82 as a dividend and sold the share for $136. What was your holding-period return
Answer:
Holding period return =14.85 %
Explanation:
The return on stock is the sum of the dividends earned and capital gains made during the holding period of the investment.
Dividend is the proportion of the profit made by a company which is paid to shareholders.
Capital gains is another type of the return made on an equity investment as a result of increase in the value of the shares. It is difference between the cost of the share and the value at the time of disposal.
Therefore, we can can compute the return on the investment as follows:
Holding period return = (Dividend + capital gain)/Begin Price of stock × 100
Dividend = $1.82
Capital gains= 136 - 120 = 16
Total dollar return on Investment = 1.82 + 16= $ 17.82
= 17.82/120 × 100 = 14.85 %
Holding period return =14.85 %
It is always necessary for an agent to disclose the identity of the principal to any third person with whom he is contracting; otherwise the contract becomes void.
a. True
b. False
If the price that determined where marginal revenue equaled marginal cost were below the bottom of the average variable cost curve, then the profit-maximizing, monopolistically competitive firm would
Answer: c. shut down because it would cost more to produce and sell output than it would to shut down and lose all fixed costs.
Explanation:
The profit maximizing, monopolistically competitive firm maximises profit at the point where marginal revenue equals marginal costs.
If this point is below Average variable costs then that means that the company is not making enough to cover its variable costs. Should this be the case then the company should shutdown operations because variable costs are only there when the company is producing. If they shutdown then they will no longer incur them which would be the cheaper option.
They would take losses on the fixed costs but these have already been incurred so it would be better to lose the fixed costs than continue to make losses on variable costs.
If an investor's aversion to risk increased, would the risk premium on a high beta stock increase by more or less than that of a low-beta stock? Explain.
Answer:
risk premium increases by more of the low - beta stock
A risk averse investor is an investor that avoids risk. if risk aversion increases, it means that the investor is more wary of risky investment.
Beta measures the volatility of a portfolio. the higher the volatility, the more risky the portfolio is.
risk premium measures the rate of return in excess of the risk free rate.
According to CAPM :
risk free rate + (beta x stock risk premium)
Beta is a multiplier of stock risk premium, so the higher the beta, the more there would be an increase in the stock risk premium
If a risk averse investor invests in a high beta stock, he would want extra or higher compensation for holding such a volatile stock. this extra compensation would be in the form of a higher risk premium.
Explanation:
the fair value of Blossom is estimated to be $820,800. The carrying value of Blossom’s net identifiable assets, including the goodwill, at year-end is $855,000. Prepare Cullumber’s journal entry, if necessary, to record impairment of goodwill.
Answer:
Cullumber Company
Journal Entry:
Debit Loss on Goodwill Impairment $34,200
Credit Goodwill $34,200
To record the loss on goodwill impairment.
Explanation:
a) Data and Calculation:
Fair value = $820,800
Carrying value of net identifiable assets, including goodwill = $855,000
Goodwill impairment = $34,200 ($855,000 - $820,800)
b) Cullumber, which acquired Blossom is expected to check for the impairment of goodwill yearly. The impairment occurs when the carrying value of the net identifiable assets of Blossom is more than the fair value of Blossom. Generally Accepted Accounting Standards require the annual review of the fair value of goodwill to check for its impairment. By the above entry, the goodwill will be reduced by $34,200 and a loss debited in Cullumber's accounts.
