Measurement Fundamentals of Financial Accounting
An investor believes that Myers and Myers can generate $20,000 cash per year for ten years, at which time it could be sold for $80,000. The FMVs of each asset as of December 31, 2014, follow:
Cash                                     $ 10,000
Short-term investments       14,000
Land                                     60,000
Buildings and machinery       40,000
Total FMV                            $124,000
REQUIRED:
a. What is the book value of Myers and Myers as of December 31, 2014?
b. What is the value of Myers and Myers as a going concern (i.e., present value of the net future cash inflows) as of December 31, 2014? Assume a discount rate of 10 percent.
c. What is the liquidation value of Myers and Myers (i.e., how much cash would Myers and Myers be able to generate if each asset were sold separately and each liability were paid off on December 31, 2014)?
d. Discuss the differences among the book value of the company, the present value, and the liquidation value. Calculate goodwill, and explain it in terms of these three valuation bases.

The December 31, 2014 balance sheet of Myers and Myers, prepared under generally accepted accounting principles, follows.
Assets
Cash                               $ 10,000
Short-term investments 14,000
Land                                  20,000
Buildings and machinery 80,000
Total assets                   $124,000

Liabilities and Shareholders' Equity
Current liabilities             $ 8,000
Long-term liabilities       20,000
Common stock                80,000
Retained earnings          16,000
Total liabilities and
shareholders' equity       $124,000

Measurement Fundamentals of Financial Accounting An investor belie...