What would lead to Company A recording Goodwill on their own Balance Sheet? A. An appraiser...

What would lead to Company A recording Goodwill on their own Balance Sheet? A. An appraiser determines that Company A is worth more than its financial statements report. B. Company A buys another company and pays more for it than the fair value of the total assets less the fair value of the liabilities of that company. C. Company A is sold to another company for more than the financial statements say it is worth. D. none of the listed choices. E. Company A improves their reputation for increased attention to social responsibility.

Solutions

Expert Solution

Correct answer:

Option(B) is correct answer that is the company A buys another company and pays more for it than the fair value of the total assets less the fair value of the liabilities of that company because they record the goodwill on it's balance sheet when purchaser pays higher price than net fair value of assets:

Incorrect Answers:

Option(A) is incorrect answer that an appraiser determines that Company A is worth more than its financial statements report because goodwill is recorded only when the purchaser pays higher price than recorded price of assets.

Option(C) is incorrect answer that the company A is sold to another company for more than the financial statements say it is worth because goodwill is recorded when purchaser pays higher price than net fair value of assets.

Option(E) is incorrect answer because that is a company A improves their reputation for increased attention to social responsibility because goodwill is calculated when company A buys the another company at higher value than it net fair value.

So correct answer is option(B)

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Recording Goodwill upon Acquisition On January 1, 2020, the balance sheet of Naperville Company (a sole...

Recording Goodwill upon Acquisition On January 1, 2020, the balance sheet of Naperville Company (a sole proprietorship) was as follows. Assets Liabilities Accounts receivable (net of allowance) $96,000 Current $60,800 Inventory 144,000 Noncurrent 128,000 $188,800 Plant and equipment (net of depreciation) 320,000 Equity Land 48,000 Owners’ equity 419,200 Total $608,000 Total liabilities and owners’ equity $608,000 On January 1, 2020, Chicago Corporation purchased all of the assets and assumed all of the liabilities listed on the above balance sheet for...

Recording Goodwill upon Acquisition On January 1, 2020, the balance sheet of Naperville Company (a sole...

Recording Goodwill upon Acquisition On January 1, 2020, the balance sheet of Naperville Company (a sole proprietorship) was as follows. Assets Liabilities Accounts receivable (net of allowance) $120,000 Current $76,000 Inventory 180,000 Noncurrent 160,000 $236,000 Plant and equipment (net of depreciation) 400,000 Equity Land 60,000 Owners’ equity 524,000 Total $760,000 Total liabilities and owners’ equity $760,000 On January 1, 2020, Chicago Corporation purchased all of the assets and assumed all of the liabilities listed on the above balance sheet for...

3. What would be the result on your balance sheet of recording unearned revenue as revenue?...

3. What would be the result on your balance sheet of recording unearned revenue as revenue? a. Overstated income and overstated liabilities b. Understated revenue and understated assets c. Overstated income and understated liabilities d. Understated income and understated liabilities

Goodwill Stillman Company is considering purchasing EKC Company. EKC's balance sheet at December 31, 2016, is...

Goodwill Stillman Company is considering purchasing EKC Company. EKC's balance sheet at December 31, 2016, is as follows: Cash $54,000 Current liabilities $56,000 Accounts receivable 71,000 Bonds payable 243,000 Inventory 130,000 Common stock 250,000 Property, plant, and equipment (net) 620,000 Retained earnings 326,000 $875,000 $875,000 At December 31, 2016, Stillman discovered the following about EKC: No allowance for uncollectible accounts has been established. An allowance of $4,500 is considered appropriate. The LIFO inventory method has been used. The FIFO inventory...

Goodwill Composite Company is considering purchasing EKC Company. EKC's balance sheet at December 31, 2016, is...

Goodwill Composite Company is considering purchasing EKC Company. EKC's balance sheet at December 31, 2016, is as follows: Cash $56,000 Current liabilities $65,000 Accounts receivable 71,000 Bonds payable 154,000 Inventory 110,000 Common stock 200,000 Property, plant, and equipment (net) 650,000 Retained earnings 468,000 $887,000 $887,000 At December 31, 2016, Composite discovered the following about EKC: No allowance for uncollectible accounts has been established. An allowance of $4,200 is considered appropriate. The LIFO inventory method has been used. The FIFO inventory...

We have reviewed the topic of Goodwill on the Balance Sheet which is created when a...

We have reviewed the topic of Goodwill on the Balance Sheet which is created when a company acquires another and pays more than the market value of the acquired company's net assets. What I want you to address in this discussion board are the following: A. What type of "event" results in goodwill being recorded on a company's balance sheet? B. How is goodwill evaluated to determine whether this specific asset is impaired? If it is deemed to be impaired,...

1. What balance sheet classification would be used for a debt security that a company intends...

1. What balance sheet classification would be used for a debt security that a company intends to hold for only a short period of time? Trading security Available-for-sale security Held-to-maturity security Noncontrolling interest 2. What balance sheet classification would be used for a debt security that a company has both the positive intent and ability to hold until all principal and interest is fully paid? Trading security Held-to-maturity security Available-for-sale security Equity investment 3. Which of the following types of...

In what section of the balance sheet should the following items appear, and what balance sheet terminology would you use?

In what section of the balance sheet should the following items appear, and what balance sheet terminology would you use? (a) Treasury stock (recorded at cost). (b) Checking account at bank. (c) Land (held as an investment). (d) Sinking fund. (e) Unamortized premium on bonds payable. (f) Copyrights. (g) Pension fund assets. (h) Premium on common stock. (i) Long-term investments (pledged against bank loans payable).

P2-3 Recording Transactions in T-Accounts, Preparing the Balance Sheet from a Trial Balance, and Evaluating the...

P2-3 Recording Transactions in T-Accounts, Preparing the Balance Sheet from a Trial Balance, and Evaluating the Current Ratio LO2-2, 2-4, 2-5 Cougar Plastics Company has been operating for three years. At December 31, 2014, the accounting records reflected the following: Cash $ 22,000 Accounts payable $ 15,000 Investments (short-term) 3,000 Accrued liabilities payable 4,000 Accounts receivable 3,000 Notes payable (short-term) 7,000 Inventory 20,000 Long-term notes payable 47,000 Notes receivable (long-term) 1,000 Common stock 10,000 Equipment 50,000 Additional paid-in capital 80,000...

On January 1, 2022, Pharoah Company had a balance of $395,500 of goodwill on its balance sheet that resulted from the purchase of a small business in a prior year.

On January 1, 2022, Pharoah Company had a balance of $395,500 of goodwill on its balance sheet that resulted from the purchase of a small business in a prior year. The goodwill had an indefinite life. During 2022, the company had the following additional transactions. Jan. 2 Purchased a patent (7-year life) $351,750. July 1 Acquired a 10-year franchise; expiration date July 1, 2,032, $604,800. Sept. 1Research and development costs $177,000. (a) Prepare the necessary entries to record the transactions related to intangibles. All costs incurred...

Subjects