In recording the acquisition cost of an entire business:
A)goodwill is recorded as the excess of cost over the fair market value of identifiable net assets.
B)assets are recorded at the seller's book values.
C)goodwill,if it exists,is never recorded.
D)goodwill is recorded as the excess of cost over the book value of identifiable net assets.

Question

Quizplus · Accepted Answer

Goodwill in a business acquisition is recorded as the excess of cost over the fair market value of identifiable net assets. This means that if the acquisition cost is higher than the value of the identifiable net assets acquired, the excess amount will be recorded as goodwill on the balance sheet. This is because the excess amount represents intangible assets such as the value of the company's brand, reputation, and customer base that are not reflected in the identifiable net assets.

In Recording the Acquisition Cost of an Entire Business