Xtra Company Purchased a Business from Argus for $96,000 Above

question 27

Multiple Choice

Xtra Company purchased a business from Argus for $96,000 above the fair value of its net assets. Argus had developed the goodwill over 12 years. How much would Xtra amortize the goodwill for its first year?

• A) $7,000
• B) $8,000
• C) goodwill is not amortized
• D) not enough information to calculate amortization

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Definitions:

FICA-OASDI

FICA-OASDI is the Federal Insurance Contributions Act for Old-Age, Survivors, and Disability Insurance, a payroll tax funding Social Security and Medicare in the United States.

Taxable Earnings

The portion of an individual's or company's income that is subject to taxes by federal, state, or local governments.

Payroll Register

A record showing the details of the wages paid to each employee for a specific period.

Payroll Register

A document that summarizes the wages, deductions, and net pay of all employees for a specific payroll period.