Which Statement About Negative Goodwill Is True

question 97

Multiple Choice

Which statement about negative goodwill is true?

• A) Negative goodwill is not recorded.
• B) Negative goodwill should be recorded as a direct credit to retained earnings.
• C) Negative goodwill should be allocated proportionately to reduce the cost of all assets acquired on the basis of their relative market values.
• D) Negative goodwill should be allocated proportionately to reduce the cost of all assets acquired except long- term investments and other financial assets on the basis of their relative market values.

---

Definitions:

Nominal Interest Rates

Interest rates that have not been adjusted for inflation, reflecting the rate of interest paid by borrowers or earned by investors.

Pure Discount Securities

Financial instruments that are sold at a discount from their face value and pay no interest until maturity, such as zero-coupon bonds.

Clean Price

The price of a bond excluding any interest that has accrued since issue or during the last coupon payment.

Dirty Price

The price of a bond that includes accrued interest, in contrast to the clean price which excludes it.