The most you would pay for the business is 20 times the


Can anyone explain this to me and help me figure it out? Idon't have a clue where to start!

Benjamin O'Henry has owned and operated O'Henry's DataServices since its beginning ten years ago. From all appearances,the business has prospered. In the past few years, you have becomefriends with O'Henry and his wife. Recently, O'Henry mentioned thathe has lost his zest for the business and would consider selling itfor the right price. You are interested in buying this business,and you obtain its most recent monthly unadjusted trial balancewhich follows:

O'Henry's Data Services Unadjusted Trial Balance November30, 20XX
Cash.................................... $9,700
Accountsreceivable........................... 7,900
Prepaidexpenses............ 2,600
Furniture, fixtures, & equipment 151,300
Accumulated depreciation
$15,600
Accountspayable............
3,800
Salarypayable..................

Unearned service revenue
6,700
Benjamin O'Henry, capital
137,400
Benjamin O'Henry, withdrawals 2,000
Servicerevenue............
14,300
Rentexpense...............

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, andNovember is a typical month. Your investigation reveals that theunadjusted trial balance does not include the effects of monthlyrevenues of $2,100 and monthly expenses totaling $2,750. If youwere to buy O'Henry's Data Services, you would hire a manager whowould 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 endingcapital. Compute this amount. Under these conditions, how much should you offer O'Henry? Give your reason.

Request for Solution File

Ask an Expert for Answer!!
Accounting Basics: The most you would pay for the business is 20 times the
Reference No:- TGS0597044

Expected delivery within 24 Hours