Which Statement About Negative Goodwill Is True

question 40

Multiple Choice

Which statement about negative goodwill is true?

• A)Negative goodwill is the amount by which the fair value of identifiable net assets acquired exceeds the price paid.
• B)Negative goodwill results when the cash paid for a company exceeds the fair market value of the net assets acquired.
• C)Negative goodwill should be recorded as a direct credit to retained earnings.
• D)Negative goodwill should first be allocated proportionately to reduce the cost of all assets acquired (except long-term investments in marketable securities)on the basis of their relative market values.

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Definitions:

Linear Regression

A statistical method for modeling the relationship between a dependent variable and one or more independent variables using a linear equation.

Correlational Analysis

A statistical method used to determine the degree to which two variables are related.

Analysis Of Variance

A test for the difference between two or more means. A simple analysis of variance (or ANOVA) has only one independent variable, whereas a factorial analysis of variance tests the means of more than one independent variable. One-way analysis of variance looks for differences between the means of more than two groups.

Slope

The measure of the steepness or incline of a line, defined as the ratio of the vertical change to the horizontal change between two points.