One advantage of the excess-earnings method is that it:
A)offers an estimate of goodwill.
B)increases the profit.
C)increases the cash.
D)All of the above

Question

Quizplus · Accepted Answer

The excess-earnings method helps in estimating the value of goodwill, which is an intangible asset in a business. This method determines the excess earnings of a business by calculating the expected return on net tangible assets and subtracting it from the actual earnings. The excess earnings are then capitalized to determine the value of goodwill. This method does not increase profit or cash, but it helps in estimating the value of goodwill, which is important in determining the overall value of a business.

One Advantage of the Excess-Earnings Method Is That It