When Dealing with the Elements of the Financial Statements, It

question 73

Multiple Choice

When dealing with the elements of the financial statements, it is important to consider that:

• A) the current portion of long-term debt is the amount due within the next year and must be disclosed separately.
• B) fixed assets are short-term assets the company plans on selling in the near future.
• C) cost of goods sold is a component of paid-in capital.
• D) retained earnings is a long-term liability account.

---

Definitions:

Indefinite Useful Life

An intangible asset with an expected life that extends beyond the foreseeable future, not requiring amortization but subject to annual impairment tests.

Acquisition Differential

The difference between the purchase price of an acquired entity and the fair value of its identifiable net assets.

Goodwill Impairment

The decrease in the value of a company’s goodwill, which occurs when the market value of the entity is less than its recorded value on the balance sheet.

Fair Value Adjustment

An accounting process to adjust the book value of an asset or liability to reflect its current market value.