Alex White has owned and operated White Biomedical Systems, Inc., a management consulting firm for physicians, since its beginning 10 years ago. From all appearances the business has prospered. White lives in the fast lane-flashy car, home located in an expensive suburb, frequent trips abroad, and other signs of wealth. In the past few years, you have become friends with him and his wife through weekly rounds of golf at the country club. Recently, he mentioned that he has lost his zest for the business and would consider selling it for the right price. He claims that his clientele is firmly established and that the business "runs itself." According to White, the consulting procedures are fairly simple and anyone could perform the work.

Assume that you are interested in buying this business. You obtain its most recent monthly trial balance, which follows. Revenues and expenses vary little from month to month and April is a typical month. Your investigation reveals that the trial balance does not include the effects of monthly revenues of \(\$ 1,100\) and expenses totaling \(\$ 2,100\). If you were to buy White Biomedical Systems, you would hire a manager so you could devote your time to other duties. Assume that this person would require a monthly salary of \(\$ 2,000\).

1. Is this an unadjusted or an adjusted trial balance? How can you tell?
2. Assume that the most you would pay for the business is 30 times the monthly net income you could expect to earn from it. Compute this possible price.
3. White states that the least he will take for the business is its stockholders' equity on April 30 . Compute this amount.
4. Under these conditions, how much should you offer White? Give your reason.

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WHITE BIOMEDICAL SYSTEMS, INC. TRIAL BALANCE APRIL 30, 19XX Cash........... $ 9,700 Accounts receivable 4,900 Prepaid expenses.. 2,600 Plant assets... 241,300 Accumulated depreciation. $189,600 Land.......... 158,000 Accounts payable. 13,800 Salary payable Unearned consulting revenue. 56,700 Common stock.. 50,000 Retained earnings. 107,400 Dividends...... Consulting revenue.. 9,000 12,300 Rent expense. Salary expense. 3,400 Utilities expense.. 900 Depreciation expense. Supplies expense Total $429,800 $429,800