Question

Goodwill (Cost in Excess of Net Assets Acquired):

A) Represents the fair value of assets acquired.
B) Arises when the purchase price exceeds the fair value of identifiable net assets.
C) Represents the fair value of liabilities assumed.
D) Is recorded as an expense on the income statement.

Answer 1

Goodwill (Cost in Excess of Net Assets Acquired) arises when the purchase price exceeds the fair value of identifiable net assets. It represents the excess value that a company pays when acquiring another company.

Step-by-step explanation:

Goodwill (Cost in Excess of Net Assets Acquired) arises when the purchase price exceeds the fair value of identifiable net assets. It represents the excess value that a company pays when acquiring another company, which is not attributed to tangible or identifiable assets. Goodwill is recorded as an intangible asset on the balance sheet and is subject to periodic impairment testing and potential write-downs.