How Is Goodwill Accounted for Subsequent to Acquisition

question 82

Multiple Choice

How is goodwill accounted for subsequent to acquisition?

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

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Definitions:

Fixed Manufacturing Overhead

Indirect manufacturing costs that remain relatively constant regardless of the volume of production, including costs like factory rent, salaries of supervisors, and depreciation of factory equipment.

Direct Labor

The cost of wages for labor directly involved in the production of goods or services.

Raw Material

Basic materials and substances used in the initial stages of production to create goods and services.

Raw Materials

Basic materials that are processed and used in the manufacturing of goods or products.