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?

    <p>Revaluation method</p> Signup and view all the answers

    Which financial statement does Goodwill appear on?

    <p>Balance sheet</p> Signup and view all the answers

    When calculating Goodwill, which factor is NOT considered?

    <p>Book value of the business</p> Signup and view all the answers

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

    <p>Market Capitalization</p> Signup and view all the answers

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

    <p>Historical Cost of Assets</p> Signup and view all the answers

    What is the primary characteristic of purchased Goodwill in accounting?

    <p>It represents the future economic benefits arising from assets that cannot be individually identified and separately recognized</p> Signup and view all the answers

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