Which of the Following Properly Describes the Accounting for Goodwill

question 45

Multiple Choice

Which of the following properly describes the accounting for goodwill?

• A)Goodwill is recorded when it is internally generated.
• B)Goodwill is amortized over its useful life.
• C)Goodwill is the difference between the amount paid for a company relative to the book value of the acquired company's net assets.
• D)Goodwill is written down when it has been determined to be impaired.

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Definitions:

Stock Repurchase Program

A plan initiated by a company to buy back its own shares from the marketplace, reducing the number of outstanding shares.

Special Dividend

A one-time, non-recurring dividend paid by a company to its shareholders, usually reflecting exceptionally good earnings.

2-for-1 Stock Split

A corporate action where a company divides its existing stock into two, reducing the price of each share for investors while maintaining the overall value of their investment.

Information Content Effect

The impact on a company's stock price when new information becomes available to market participants.