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Benjamin O'Henry has owned and operated O'Henry's Data Services since its beginning ten years ago

Benjamin O'Henry has owned and operated O'Henry's Data Services since its beginning ten years ago
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Price: $3.00
Availability: In Stock
Model: A
Average Rating: 5 out of 5 Stars!

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Solution Guide:

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.

 

FILE: MS WORD

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