Final answer:
Goodwill is an intangible asset recorded when an acquisition's purchase price exceeds the fair market value of its net assets. It cannot be directly charged to stockholders' equity but must be recorded as an asset and may reduce retained earnings if impaired.
Step-by-step explanation:
The statement 'Goodwill can be purchased and charged directly to stockholders' equity?' is false. Goodwill is an intangible asset that is recorded on the balance sheet when a company acquires another business for more than the fair market value of its net assets. The excess purchase price is considered goodwill. According to accounting standards, goodwill cannot be directly charged against stockholders' equity; instead, it must initially be recorded as an intangible asset. Goodwill may be subject to impairment testing and may be written down if it is determined to be impaired, which would affect the income statement and subsequently reduce retained earnings within stockholders' equity.