Question : 71. Goodwill is: a.  Amortized over the greater of its : 1255980

 

 

71. Goodwill is:

a.  Amortized over the greater of its estimated life or forty years.

b.  Only recorded by the seller of a business.

c.  The value of a business as a whole, over and above the  value of its net identifiable assets.

d.  Recorded when created internally through advertising expense.

 

 

72. In accounting, goodwill

a.

May be recorded whenever a company achieves a level of net income that exceeds the industry average.

b.

Is amortized over its useful life.

c.

May be recorded when a company purchases another business.

d.

Must be expensed in the period it is recorded because benefits from goodwill are difficult to identify.             

 

 

73. In accounting, goodwill

a.

Is never recorded.

b.

May be recorded when a company’s level of net income exceeds the industry average.

c.

Must be expensed in the period when it is acquired.

d.

May be recorded when the company purchases another business.

 

 

74. The balance sheet of Cattleman’s Steakhouse shows assets of $86,400 and liabilities of $15,000. The fair value of the assets is $90,000 and the fair value of its liabilities is $15,000. Longhorn paid Cattleman’s $95,000 to acquire it.  Longhorn should record goodwill on this purchase of:

 

a.

$3,600.

b.

$5,000.

c.

$20,000.

d.

$23,600.

 

 

75. Northern purchased the entire business of Southern including all its assets and liabilities for $600,000. Below is information related to the two companies:

Northern

Southern

Fair value of assets

$1,050,000

$800,000

Fair value of liabilities

575,000

300,000

Reported assets

800,000

650,000

Reported liabilities

500,000

250,000

Net Income for the year

60,000

50,000

 

How much goodwill did Northern pay for acquiring Southern?

a.

$100,000.

b.

$300,000.

c.

$200,000.

d.

$150,000.

 

 

76. Lake Incorporated purchased all of the outstanding stock of Huron Company paying $850,000 cash. Lake assumed all of the liabilities. Book values and fair values of acquired assets and liabilities were:

 

Book Value

Fair Value

Current assets (net)

$130,000

$125,000

Property, plant, equip. (net)

600,000

750,000

Liabilities

175,000

175,000

              Lake would record goodwill of:

a.$ 0.

b.$150,000.

c.$345,000.

d.$850,000.

 

77. Which of the following subsequent expenditures would be capitalized?

a.

Ordinary repair.

b.

Costs that increase the service life of an asset.

c.

Routine maintenance.

d.

Both a. and c.

 

 

78. Which of the following subsequent expenditures would be capitalized?

a.

Ordinary repairs and maintenance.

b.

Additions.

c.

Improvements.

d.

Both b. and c.

 

 

79. The purchase of a new cooling system for $150,000 to upgrade an office building owned by the company would be accounted for as:

a.

Goodwill.

b.

An addition in the Buildings account.

c.

An expense in the period incurred.

d.

A patent.

 

 

80. Woods Company made an ordinary repair to a delivery truck at a cost of $500. Woods’ accountant debited the asset account, Equipment. Was this treatment an error, and if so, what will be the effect on Woods’ financial statements?

a.

No, the repair was accounted for correctly.

b.

Yes, the error overstated assets and net income.

c.

Yes, in the years following, net income will be overstated.

d.

Yes, the error understated net income.