The reason goodwill is sometimes referred to as a master valuation account is because
A) it represents the purchase price of a business that is about to be sold.
B) it is the difference between the fair market value of the net tangible and identifiable intangible assets as compared with the purchase price of the acquired business.
C) the value of a business is computed without consideration of goodwill and then goodwill is added to arrive at a master valuation.
D) it is the only account in the financial statements that is based on value, all other accounts are recorded at an amount other than their value.

Question

Quizplus · Accepted Answer

Goodwill is considered a master valuation account because it represents the excess of the purchase price of an acquired business over the fair value of the net identifiable assets (both tangible and intangible) of the business. This excess amount reflects non-physical assets such as brand reputation, customer relationships, and intellectual property that are not individually identified and separately valued in the acquisition process.

The Reason Goodwill Is Sometimes Referred to as a Master