​Which of the Following Is the Effect of Impaired Goodwill

question 39

Multiple Choice

​Which of the following is the effect of impaired goodwill on liquidity and profitability metrics?

• A) ​Both profitability and liquidity will remain unaffected.
• B) ​Both profitability and liquidity will decrease.
• C) ​Profitability will increase, whereas liquidity will remain unaffected.
• D) ​Liquidity will decrease, whereas profitability will increase.

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Definitions:

Adjusting Entries

Entries recorded at the conclusion of an accounting period to adjust the account balances prior to the creation of financial statements.

Revenue And Expense

Key components of an income statement, with revenue representing income earned and expense depicting costs incurred in generating that income.

Correcting Entries

Journal entries made in accounting to correct previously made errors or adjustments in the financial statements.

Accrual Basis

An accounting method that records revenues and expenses when they are earned or incurred, regardless of when cash is exchanged.