The Jared Corporation is contemplating the acquisition of the Jonathan Company.Jared believes that Jonathan has goodwill, but Jared is not clear as to how to determine a value of Jonathan Company's goodwill.
Required:
Describe briefly the series of steps that should be used by Jared Corporation in calculating an estimate of the value of Jonathan Company's goodwill.

Jared Corporation should use the following procedures in order to calculate an estimate of the value of Jonathan Company's goodwill: a. Estimate the average future annual earnings from JonathanCompany sidentifiable net assets.
b. Estimate the rate (or rates) of retum that should be eamed on Jonathan's identifiable net ass ets
c. Estimate the current market value of Jonathan's identifiable net assets.
d. Calculate the estimated excess annual earnings of Jonathan
e. Estimate the expected life of the excess amula earnings.
f. Calculate the present value of the estimated excess amual earnings.