FUNDAMENTALS OF FINANCIAL ACCOUNTING
6th Edition
ISBN: 9781260664386
Author: PHILLIPS, LIBB
Publisher: MCG
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Chapter 9, Problem 9MC
To determine
To find: The correct option, the option which indicates the number of statements that are true regarding
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Which of the following statements is true regarding goodwill?
a.Goodwill is amortized based on the lesser of the useful life or the legal life.
b.Goodwill is the exclusive use of a name, term, or symbol used to identify a business or its product.
c.If the purchase price of a business exceeds the fair value of its net assets, the excess is recorded as goodwill.
d.Goodwill is amortized based on a 10-year period.
Which statement regarding goodwill is true?
a. goodwill is an unidentifiable intangible assetb. internally developed goodwill should be capitalized while purchased goodwill should beexpensedc. goodwill can be defined as the value attached to the ability of a company to earn a higherthan normal rate of return on the book value of its identifiable assetsd. in some situations, FASB Statement No. 141 requires that negative goodwill be recorded
The IASB standard (IFRS 3 Business Combinations) issued with respect to the treatment ofnegative goodwill requires that:A. it must be recognized in income immediately as an extraordinary item.B. it must be recognized in income immediately.C. it can be deferred and amortized over a maximum of 40 years.D. it must be reflected as an increase in Liabilities and a Reduction in Capital for theParent Company.
Chapter 9 Solutions
FUNDAMENTALS OF FINANCIAL ACCOUNTING
Ch. 9 - Define long-lived assets. What are the two common...Ch. 9 - Under the cost principle, what amounts should be...Ch. 9 - What is the term for recording costs as assets...Ch. 9 - 4. Waste Management, Inc., regularly incurs costs...Ch. 9 - Distinguish between ordinary repairs and...Ch. 9 - Describe the relationship between the expense...Ch. 9 - Why are different depreciation methods allowed?Ch. 9 - In computing depreciation, three values must be...Ch. 9 - Prob. 9QCh. 9 - After merging with Northwest Airlines, Delta...
Ch. 9 - A local politician claimed, to reduce the...Ch. 9 - What is an asset impairment? How is it accounted...Ch. 9 - What is book value? When equipment is sold for...Ch. 9 - Prob. 14QCh. 9 - Prob. 15QCh. 9 - FedEx Corporation reports the cost of its aircraft...Ch. 9 - Prob. 17QCh. 9 - Prob. 18QCh. 9 - (Supplement 9A) How does depletion affect the...Ch. 9 - (Supplement 9B) Over what period should an...Ch. 9 - Prob. 1MCCh. 9 - Prob. 2MCCh. 9 - Prob. 3MCCh. 9 - A company wishes to report the highest earnings...Ch. 9 - Barber, Inc., depreciates its building on a...Ch. 9 - Thornton Industries purchased a machine on July 1...Ch. 9 - ACME. Inc., uses straight-line depreciation for...Ch. 9 - What assets should be amortized using the...Ch. 9 - Prob. 9MCCh. 9 - The Simon Company and the Allen Company each...Ch. 9 - Classifying Long-Lived Assets and Related Cost...Ch. 9 - Prob. 2MECh. 9 - Prob. 3MECh. 9 - Computing Book Value (Straight-Line Depreciation)...Ch. 9 - Computing Book Value (Units-of-Production...Ch. 9 - Computing Book Value (Double-Declining-Balance...Ch. 9 - Calculating Partial-Year Depreciation Calculate...Ch. 9 - Recording Asset Impairment Losses After recording...Ch. 9 - Recording the Disposal of a Long-Lived Asset...Ch. 9 - Reporting and Recording the Disposal of a...Ch. 9 - Prob. 11MECh. 9 - Prob. 12MECh. 9 - Computing and Evaluating the Fixed Asset Turnover...Ch. 9 - (Supplement 9A) Recording Depletion for a Natural...Ch. 9 - Prob. 15MECh. 9 - Prob. 1ECh. 9 - Prob. 2ECh. 9 - Determining Financial Statement Effects of an...Ch. 9 - Prob. 4ECh. 9 - Determining Financial Statement Effects of...Ch. 9 - Computing Depreciation under Alternative Methods...Ch. 9 - Computing Depreciation under Alternative Methods...Ch. 9 - Prob. 8ECh. 9 - Demonstrating the Effect of Book Value on...Ch. 9 - Evaluating the Impact of Estimated Useful Lives of...Ch. 9 - Calculating the Impact of Estimated Useful Lives...Ch. 9 - Prob. 12ECh. 9 - Prob. 13ECh. 9 - Computing and Interpreting the Fixed Asset...Ch. 9 - Computing Depreciation and Book Value for Two...Ch. 9 - Prob. 16ECh. 9 - Prob. 17ECh. 9 - Computing Acquisition Cost and Recording...Ch. 9 - Prob. 2CPCh. 9 - Analyzing and Recording Long-Lived Asset...Ch. 9 - Computing Acquisition Cost and Recording...Ch. 9 - Recording and Interpreting the Disposal of...Ch. 9 - Prob. 3PACh. 9 - Prob. 4PACh. 9 - Computing Acquisition Cost and Recording...Ch. 9 - Recording and Interpreting the Disposal of...Ch. 9 - Analyzing and Recording Long-Lived Asset...Ch. 9 - Prob. 4PBCh. 9 - Accounting for Operating Activities (Including...Ch. 9 - Prob. 1SDCCh. 9 - Prob. 2SDCCh. 9 - Ethical Decision Making: A Mini-Case Assume you...Ch. 9 - Critical Thinking: Analyzing the Effects of...Ch. 9 - Prob. 7SDCCh. 9 - Accounting for the Use and Disposal of Long-Lived...
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- Naughty Company assembles the following data relative to a certain entity in determining the amount to be paid for net assets and goodwill: Assets at fair value before goodwill 2, 600, 000Liabilities 900, 000Shareholders’ equity 1, 700, 000 Net earnings after elimination of unusual or infrequent items:2008 200, 0002009 230, 0002010 300, 0002011 250, 0002012 270, 000 Required:Calculate the amount of goodwill under the following:1. Average earnings are capitalized at 10%2. A return of 8% is considered normal on net assets at fair value. Excess earnings are capitalized at 15%.3. A return of 10% is considered normal on net assets at fair value. Goodwill is measured at 5 years excess earnings.4. A return of 10% is considered normal on net assets at fair value. Excess earnings are expected to…arrow_forwardWhich of the following statements regarding IFRS impairment testing for goodwill is false? Group of answer choices The firm can perform the fair value measurement for each cash-generating unit at any time during the fiscal year, as long as it uses the measurement date consistently. If the impairment loss is greater than the book value of goodwill, the cash-generating unit proportionally reduces the carrying value of other assets. IFRS requires an impairment test for goodwill whenever there are significant impairment indicators. The firm reports an impairment loss when the recoverable amount of the cash-generating unit is less than the carrying value of the cash-generating unit, including goodwill.arrow_forwardWhat is the difference in the treatment of internally generated goodwill from the purchased goodwill under IAS 38 intangible assets? Purchased goodwill is not amortised; whereas, internally generated goodwill can be amortised over a period of 10 years Purchased goodwill is to be expensed in the period it is bought, whereas internally generated goodwill is to be deferred and amortised over a period of no less than 20 years Purchased goodwill may be recorded as an asset, whereas internally generated goodwill may not Purchased goodwill can be amortised over a period of 10 years; whereas, internally generated goodwill is recognised as an asset which cannot be amortisedarrow_forward
- Which of the following statements is true about goodwill? O a. The intangible asset goodwill may be written off directly to retained earnings. O b. The intangible asset goodwill may be capitalized either when purchased or created internally. O c. The intangible asset goodwill may be capitalized only when created internally. Fin d. The intangible asset goodwill may be capitalized only when purchased. 2.arrow_forwardIn Able Company’s efforts to estimate a value for Baker Company's goodwill, Able is estimating Baker Company's expected future earnings. Able is using Baker's past earnings to project the future earnings. Which of the following items should be eliminated from Baker's past earnings in order to project future earnings? Extraordinary items Amortization expense for identifiable intangibles a. Yes Nob. Yes Yesc. No Yesd. No Noarrow_forwardWhich of the following properly describes the accounting for goodwill? Multiple Choice Goodwill is amortized over its useful life. Goodwill is the difference between the amount paid for a company relative to the book value of the acquired company's net assets. Goodwill is written down when it has been determined to be impaired. Goodwill is recorded when it is internally generated.arrow_forward
- HOW MUCH IS THE GOODWILL?arrow_forward23 Which statements are correct concerning goodwillI. goodwill shall not be amortized because its useful life is indefiniteII. goodwill shall be tested for impairment at least annually or more frequently if events or changes in circumstances indicate a possible impairment.III. Once impairment loss is recognized for goodwill, the loss taken up is not allowed to be reversed in a subsequent period.IV. Further costs of developing and maintaining goodwill should be capitalized. a. I, II and III b. I,III and IV c. I,II and IV d. II,III and IVarrow_forwardtrue or false 1. Some intangible assets are not required to be amortized every year. 2. Internally created intangibles are recorded at cost. 3. Internally generated intangible assets are initially recorded at fair value. 4. Amortization of limited-life intangible assets should not be impacted by expected residual values. 5. Internally generated goodwill should not be capitalized in the accounts 6. Dividends in arrears on cumulative preferred stock should be recorded as a current liability. 7. Magazine subscriptions and airline ticket sales both result in unearned revenues. 8. Discount on Notes Payable is a contra account to Notes Payable on the balance sheet. 9. All long-term debt maturing within the next year must be classified as a current liability on the balance sheetAll long-term debt maturing within the next year must be classified as a current liability on the balance sheet 10. A short-term obligation can be excluded from current liabilities if the company intends to refinance…arrow_forward
- 10. During the measurement period, which of the following may affect the amount of goodwill from business combination? Group of answer choices New information regarding estimates in the contingent consideration that are existing at the date of acquisition. New information regarding estimates in the contingent consideration that are not existing at the date of acquisition Nothing can affect the amount of goodwill. New information regarding estimates in the contingent considerationarrow_forwardUnder IFRS, there is never an impairment loss related to goodwill when ________. Group of answer choices the recoverable amount of the cash-generating unit less than the carrying value of the cash-generating unit the value in use of the cash-generating unit is greater than its fair value less cost to sell the value in use of the cash-generating unit is less than its fair value less cost to sell the recoverable amount of the cash-generating unit is greater than the carrying value of the cash-generating unit including goodwillarrow_forward7. What is the amount of revaluation surplus on December 31, 2021? A. 600,000 B. 700,000 C. 800,000 D. 0 E. None of themarrow_forward
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