Which of the Following Statements Is Correct Regarding Accounting Treatment

question 132

Multiple Choice

Which of the following statements is correct regarding accounting treatment of goodwill?

• A) Goodwill is recorded as an asset and is not written off as an expense unless its fair value is less than its book value.
• B) Goodwill is recorded as an asset and amortized over 5 years regardless of any change in value.
• C) Goodwill is recorded as an asset and amortized over 40 years unless its fair value decreases.
• D) Goodwill is expensed immediately in the year acquired.

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Definitions:

Dollar-Value LIFO

An inventory valuation method that uses the last-in, first-out (LIFO) principle but measures inventory in dollar amounts rather than in physical units.

Specific Identification Method

An inventory valuation method that tracks the cost of specific items sold and remaining inventory.

Manipulation Of Profits

The unethical or illegal adjustment of a company's financial records in order to present an inaccurately positive picture of its financial performance.

Expenses Against Revenues

The matching principle in accounting that involves recording expenses in the period in which they helped to generate revenues.