Which of the Following Statements About Accounting for Goodwill Under

question 102

Multiple Choice

Which of the following statements about accounting for goodwill under GAAP is correct?

• A) Usually, goodwill is recognized each year by profitable companies, based on estimates of the value of their reputation and customer loyalty.
• B) Goodwill is typically recorded based on an appraisal report on goodwill.
• C) Goodwill is recorded when a company buys another, and the value of the goodwill equals the difference between the purchase price and the value of the identifiable assets and liabilities purchased.
• D) Once recorded, goodwill is never checked for impairment.

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Definitions:

Bonus

Additional compensation given to employees as a reward for their performance, typically cash or stock options.

Withdraws

Funds taken out from a business by the owner(s) for personal use, also known as drawings.

Partnership Dissolves

The process of ending a partnership agreement, which involves the redistribution or liquidation of assets among the partners and settling the partnership's obligations.

Old Partners' Capital Accounts

Accounts used to record the amount of equity owned by each partner in a partnership, prior to any changes or reallocation of partnership interests.