Which of the Following Statements Is Correct Regarding Accounting Treatment

question 83

Multiple Choice

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

• A)Goodwill is recorded as an asset and amortized over 5 years regardless of any change in value.
• B)Goodwill is recorded as an asset and is not written off as an expense unless its value decreases.
• 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.

---

Definitions:

Asset

An Asset is any resource owned or controlled by a business or an individual that is expected to produce future economic value.

Revenue

The total income generated by a company from its business activities, such as sales of goods and services, before any expenses are deducted.

Cash Coverage Ratio

A measure of a company's ability to pay its debt obligations using its operating cash flow.

Quick Ratio

The Quick Ratio, also known as the acid-test ratio, measures a company's ability to meet its short-term obligations with its most liquid assets, excluding inventory.