Which of the Following Statements Concerning Business Goodwill Is False

question 39

Multiple Choice

Which of the following statements concerning business goodwill is false?

• A) If a business creates goodwill by developing a loyal customer base and generating brand name recognition, the tax basis in the goodwill is zero.
• B) When a taxpayer purchases a business and capitalizes the cost allocated to goodwill, the cost basis is not amortized for financial reporting purposes.
• C) When a taxpayer purchases a business and capitalizes the cost allocated to goodwill, the cost basis may be amortized over 15 years for tax purposes.
• D) The tax deduction for goodwill amortization is an unfavorable book/tax difference.

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Definitions:

Equivalent Units

A concept in cost accounting used to apportion costs in process costing, based on the stage of completion.

Ending Work In Process

The value of goods that are partially completed at the end of an accounting period, not yet ready for sale.

Equivalent Units

A concept in cost accounting used to express the amount of materials or labor in terms of fully completed units.

Conversion Costs

The combination of direct labor costs and manufacturing overhead costs that are incurred to convert raw materials into finished products.