Explain How Goodwill Arises in a Business

question 20

Essay

Explain how goodwill arises in a business. Give an example in your response.

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Definitions:

Net Realizable Value

Net Realizable Value is the estimated selling price of goods, minus the estimated costs of completion and the costs necessary to make the sale.

Summary of Significant Accounting Policies

A section in financial statements outlining the major accounting policies and methods used by an organization, ensuring transparency and consistency.

Inventory Method

An accounting approach used to evaluate and manage the merchandise or goods a company has in stock, affecting how the cost of goods sold and ending inventory are reported.

Financing Method

A strategy or process by which a company raises capital or funds to operate, expand, or invest in projects.