When an Entire Business Is Purchased, Goodwill Is the Excess

question 7

True/False

When an entire business is purchased, goodwill is the excess of cost over the carrying amount of the net identifiable assets acquired.

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Definitions:

Owner's Equity

The residual interest in the assets of the enterprise after deducting its liabilities, also known as shareholder's equity.

Net Income

The final amount of money a company makes after taking away all expenses, including taxes and the costs of operation, from the total income.

Owner Drawings

Amounts withdrawn by the owner of a business for personal use, reducing the owner's equity in the business.

Revenues

The income earned from normal business operations and includes discounts and deductions for returned merchandise.