An inconsistency in accounting theory can occur because
A)internally developed goodwill is expensed, while purchased goodwill is capitalized
B)both internally developed goodwill and purchased goodwill are expensed
C)internally developed goodwill is capitalized, while purchased goodwill is expensed
D)both internally developed goodwill and purchased goodwill are capitalized

Question

Quizplus · Accepted Answer

This is because the treatment of internally developed goodwill and purchased goodwill differs in accounting theory. Internally developed goodwill is expensed as incurred, while purchased goodwill is capitalized and amortized over its useful life. This inconsistency raises questions about the comparability and relevance of financial statements for users.

An Inconsistency in Accounting Theory Can Occur Because