Question

What is the correct presentation of the income statement?

Revenues - expenses = Net income - losses + gains

Revenues - expenses + gains - losses = Net Income

Revenues + gains - losses - expenses = Net Income

Revenues - losses - expenses + gains = Net Income

Which statement about negative goodwill is true?

Negative goodwill should be recorded as a direct credit to retained earnings.

Negative goodwill is not recorded.

Negative goodwill should be allocated proportionately to reduce the cost of all assets acquired except long-term investments and other financial assets on the basis of their relative market values.

Negative goodwill should be allocated proportionately to reduce the cost of all assets acquired on the basis of their relative market values.

An inconsistency in accounting theory can occur because

internally developed goodwill is amortized, while purchased goodwill is maintained but tested for impairment.

internally developed goodwill is capitalized, while purchased goodwill is expensed.

internally developed goodwill is expensed, while purchased goodwill is capitalized.

purchased goodwill is amortized, while internally developed goodwill is maintained but tested for impairment.

The determination of impairment losses differs under IFRS versus GAAP in that

only GAAP permits a value-in-use estimate

only IFRS permits a value-in-use estimate

only IFRS employs a disposal approach as a measure of fair value

only GAAP compares the fair value to cost

Answer 1

ans 1
Revenues - expenses + gains - losses = Net Income
First the Revenue is presented than the cost of sales and operating
expenses are presented after than other revenue and expenses are
presented than we finally get the net income.
Ans 2
correct option
Negative goodwill should be allocated proportionately to reduce the cost of all assets acquired on the basis of their relative market values.
The goodwill is negative when the fair value of assets exceeds the amount paid for it, hence the negative goodwill is recognized as a income and is recorded over the weighted average useful of the the assets acquired in the income statement
ans 3
internally developed goodwill is capitalized, while purchased goodwill is expensed.
ans 4 Only IFRS permits value in use estimate
As per IFRS when the impairement is measured the carrying
amount of asset is compared with the recoverable amount of asset and the
recoverable amount is always higher of fair value decreased by cost to sell
ans the value of the asset which is in use.