How Is Goodwill Amortized

question 21

Multiple Choice

How is goodwill amortized?

• A) It is not amortized for reporting purposes or for tax purposes.
• B) It is not amortized for reporting purposes, but is amortized over a 5-year life for tax purposes.
• C) It is not amortized for tax purposes, but is amortized over a 5-year life for reporting purposes.
• D) It is not amortized for tax purposes, but is amortized over a 15-year life for reporting purposes.
• E) It is not amortized for reporting purposes, but is amortized over a 15-year life for tax purposes.

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Definitions:

Net Income

The net income of a business following the subtraction of all costs and taxes from its earnings.

Absorption Costing

A costing method that integrates all expenses related to the manufacturing process, including direct materials, direct labor, and overhead costs, both variable and fixed, into the final product cost.

Required Rate

Often refers to the minimum expected rate of return on an investment, taking into account the risk level.

Markup

The amount added to the cost of a product to cover expenses and profit, resulting in the selling price.