Question

recorded only when there is an exchange transaction that involves the purchase of an entire business. It is the excess of cost over the fair market value of the net assets (assets minus liabilities) acquired. Goodwill is not amortized.

Answer 1

Goodwill is an accounting term used in business to represent the excess of the cost of acquiring a business over the fair market value of its net assets. It is not amortized.

Step-by-step explanation:

Goodwill is an accounting term used in the field of business. It refers to the value of a business that is recorded when there is a purchase of an entire business in an exchange transaction. Goodwill represents the excess of the cost of the acquisition over the fair market value of the net assets acquired, which is calculated by subtracting the liabilities from the assets.

For example, if a business is acquired for $1 million and the fair market value of its net assets is $800,000, then the goodwill is $200,000.

It is important to note that goodwill is not amortized, meaning it is not systematically reduced over time on the financial statements.