Goodwill in Accounting Quiz

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Questions and Answers

What is the primary characteristic of Goodwill?

It is a tangible asset
It has a definite lifespan
It arises due to natural disasters
It arises from the reputation and customer loyalty of a business (correct)

How is Goodwill calculated in accounting?

By adding the purchase price of a business to the fair value of net assets
By multiplying the sales revenue with the net profit of a business
By dividing the total assets by the total liabilities of a business
By subtracting the fair value of net assets from the purchase price of a business (correct)

What is the impact of Goodwill on the balance sheet?

It has no impact on the balance sheet
It increases the total liabilities of a business
It increases the total assets of a business (correct)
It decreases the total assets of a business

In accounting, which of the following is NOT a method to account for Goodwill?

Revaluation method (C) Signup and view all the answers

Which financial statement does Goodwill appear on?

Balance sheet (B) Signup and view all the answers

When calculating Goodwill, which factor is NOT considered?

Book value of the business (B) Signup and view all the answers

Which of the following is NOT a common method to calculate Goodwill in accounting?

Market Capitalization (A) Signup and view all the answers

In accounting, which factor is NOT considered when calculating Goodwill using the Excess Earnings method?

Historical Cost of Assets (B) Signup and view all the answers

What is the primary characteristic of purchased Goodwill in accounting?

It represents the future economic benefits arising from assets that cannot be individually identified and separately recognized (D) Signup and view all the answers