Piri Ltd Acquired 100% of the Commons Shares of Golden Co

question 17

Multiple Choice

Piri Ltd. acquired 100% of the commons shares of Golden Co. This business combination resulted in $100,000 of goodwill. Piri allocated the goodwill to three cash-generating units. At its year-end, Piri conducts a goodwill impairment test. Which of the following statements about the impairment test is true?

• A)The impairment test is applied to Golden Co. as a whole.
• B)The impairment test is applied to the business combination as a whole.
• C)The impairment test is applied to each of the three cash-generating units to which goodwill has been allocated.
• D)Piri is not required to conduct an impairment test unless its circumstances have changed materially from its previous year.

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Definitions:

Nonrivalry

A characteristic of certain goods where the consumption by one individual does not reduce availability to others, often seen in digital or public goods.

Nonexcludability

A characteristic of certain goods where it is difficult or impossible to prevent someone from using the good once it has been provided.

Optimal Quantity

The amount of a good or service that yields the maximum benefit or utility to the consumer or producer.

Marginal Cost

The cost of producing one additional unit of a good or service, important in making decisions about production levels and pricing.