Activity Instructions: Compute the goodwill for each of the following cases:

(A) An entity acquired another business. The fair value of the net assets of the acquired entity is P20,000,000 while the book value is at P18,500,000. 1. Goodwill if the total purchase price is P18,500,000 2. Goodwill if the total purchase price is P23,000,000 (B) During 2019, ABC was negotiating to acquire another business. The entity to be acquired has earnings from 2015 to 2018 at P600,000, P700,000, P700,000 and P720,000. At yearend, 2019 earnings totaled P800,000 and the fair value of the net assets were at P6,400,000. Industry average earnings is 8%. The acquisition was pushed through on Jan. 1, 2020. Goodwill was computed using each independent method. 3. Purchase of average excess earnings from the last five years. 4. Capitalization of average excess earnings using a 15% rate. 5. Capitalization of average earnings using a 10% rate. 6. Present value method using a 12% discount rate