Which Statement About Negative Goodwill Is True

question 40

Multiple Choice

Which statement about negative goodwill is true?

• A)Negative goodwill is the amount by which the fair value of identifiable net assets acquired exceeds the price paid.
• B)Negative goodwill results when the cash paid for a company exceeds the fair market value of the net assets acquired.
• C)Negative goodwill should be recorded as a direct credit to retained earnings.
• D)Negative goodwill should first be allocated proportionately to reduce the cost of all assets acquired (except long-term investments in marketable securities)on the basis of their relative market values.

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Definitions:

Adaptation

The process by which a species becomes fitted to its environment; it is the result of natural selection acting upon heritable variation over several generations.

Physiological Responses

The body's automatic reactions to a stimulus, including heart rate, hormone secretion, and muscle tension, among others.

Social Readjustment

The process of adapting to significant changes in one's life situation or societal roles, which can be a source of stress or personal growth.

Rating Scale

A set of categories designed to elicit information about a quantitative or a qualitative attribute.