Businesses Are Allowed to Record Goodwill

question 101

Multiple Choice

Businesses are allowed to record goodwill:

• A)when they enjoy an outstanding reputation and loyalty with customers.
• B)if they acquire another company at a price higher than the market value of its net assets.
• C)when they continue the business of an acquired company.
• D)if their market value has increased enormously in the recent past.

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Definitions:

Sales Transaction

The process of exchanging a good or service for payment between a buyer and a seller.

Implied Warranty

A legal assumption that a product will meet basic standards of quality and functionality, even if not expressly stated.

Merchantable

A quality of goods being fit for the purpose for which such goods are ordinarily used, a requirement for sales under many commercial laws.

Trade or Market

generally refers to a specific area or industry where goods and services are bought and sold.