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In: Accounting

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 2 years ago
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