Question

Question 2 1 points Save A Your best friend from high school approaches you to invest in 'e-track an upcoming high-tech company which he is convinced will make huge profits in the future. You are sceptical of the bu siness venture and say that you would have to look up the financial statements of the company re investing your own you the financial report and you notice that the report is unaudited and does not provide prior years results even though the firm had been operating for the last three years. Based on the above information, which qu alitative characteristics is lacking in e-track's financial reports? Relevance and timeliness. Faithful representation and comparability.

Answer 1

1) Solution: faithful representation and comparability

Explanation: As report is unaudited and does not provide prior years' results thus is not comparable over time and with similar information about other entities; and lacks faithful representation.

　

2) Solution: 86,000

Working: Goodwill is defined as the difference in price paid for the acquired company and the fair market value of its net identifiable assets.

Goodwill = (100,000 + 50,000*1.6 + 6,000) - 100,000 = 86,000