Which of the Following Statements Is Correct Regarding Accounting Treatment

question 117

Multiple Choice

Which of the following statements is correct regarding accounting treatment of goodwill?

• A) Goodwill is recorded as an asset and then amortized over a period of 5 years.
• B) Goodwill is recorded as an asset. It is not amortized but must be tested for impairment each year.
• C) Goodwill is recorded as an asset and amortized over 40 years unless its value decreases.
• D) Goodwill is expensed immediately in the year of purchase.

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Definitions:

Total Liabilities

The sum of all financial obligations or debts a company owes to external parties.

Capital

Financial resources or assets owned by a business, used to fund its operations and growth.

Meta-contrast Principle

A social psychology concept suggesting that individuals define in-groups and out-groups based on the most distinct features that differentiate them from each other.

Group Norms

Shared expectations and rules that guide behavior of members within a group, influencing conformity and group dynamics.