381 PROBLEM 6-8 CEBU PACIFIC COMPANY is considering to buy another entity and assembled the following information relative to the acquiree on Dec. 31. 2020, Assets Goodwill Per Books P3.000.000 500.000 P3,500,000 Adjusted P2,850,000 500.000 P3,350,000 Liabilities Common Stock Retained Earnings P1,600,000 P1,600,000 1,000,000 1,000,000 900.000 750.000 P3,500,000 P3,350,000 Retained earnings, Jan. 1, 2018 Net income (2018-20) Dividends (2018-20 Retained Earnings, Dec. 31, 2020 Per Books P700,000 650,000 (450,000) P900,000 Adjusted P600,000 600,000 (50.000) P750,000 Gain on sale of equipment in 2020 P50,000 P75,000 The future earnings are expected to be the same as the average normal earnings of the past three(3) years. The average earnings in excess of the 10% normal rate are capitalized at 16% in determining goodwill. REQUIRED: 1. Compute the amount of goodwill. 2. Compute the purchase price to be paid by Cebu Pacific Company to the acquiree