How Is Goodwill Accounted for Subsequent to Acquisition

question 37

Multiple Choice

How is goodwill accounted for subsequent to acquisition?

• A) It is amortized over its estimated useful life.
• B) It should be written off as soon as possible against retained earnings.
• C) It should be written off as soon as possible as an expense.
• D) It should not be amortized because it has an indefinite life.

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Definitions:

Standard Hours

The set amount of time expected to complete a job or task, often used for planning and assessing the efficiency of operations.

Volume Variance

The difference between the budgeted volume of production and the actual volume, which affects the fixed overhead costs.

Direct Labor-Hours

A measure of the total hours worked by employees who are directly involved in the production process of a company's products or services.

Fixed Manufacturing Overhead

The portion of manufacturing overhead costs that do not vary with the level of production or sales, such as factory rent.