For Financial Reporting Purposes, Goodwill Resulting from an Acquisition

question 9

Multiple Choice

For financial reporting purposes, goodwill resulting from an acquisition

• A) Must equal the fair market value of the target firm's assets
• B) Immediately impacts the acquirer's profits
• C) Is expensed over 20 years
• D) Is reviewed annually or whenever there is reason to believe it has lost value and amortized to the extent its value has declined
• E) Never affects the profits of the acquirer

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Definitions:

Normal Good

A normal good is a type of good for which demand increases when income increases, and decreases when income decreases, showing a direct relationship between income and demand.

Consumer Income

The total income received by consumers, including wages, salaries, benefits, and income from investments, which can be spent or saved.

Ice Cream

A frozen dessert made from dairy products, such as milk and cream, combined with flavors and sweeteners, often consumed as a treat or snack.

Normal Good

A type of good for which demand increases as the income of an individual increases.