When a Company Purchases Another Company That Has Existing Goodwill

question 14

Multiple Choice

When a company purchases another company that has existing goodwill and the transaction is accounted for as a stock acquisition, the goodwill should be treated in the following manner:

• A)​The goodwill on the books of an acquired company should be written off.
• B)​Goodwill is recorded prior to recording fixed assets.
• C)​The fair value of the goodwill is ignored in the calculation of goodwill of the new acquisition.
• D)​Goodwill is treated in a manner consistent with tangible assets.

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