Asked by Grace Ecton on May 27, 2024
Verified
An argument in favor of capitalizing purchased goodwill is that the cost of the purchased goodwill is supported by which theoretical characteristic?
A) relevance
B) reliability
C) decision usefulness
D) understandability
Purchased Goodwill
The amount paid in excess of the fair market value of net assets during the acquisition of a company.
Theoretical Characteristic
An abstract property or attribute foundational to theoretical models or concepts, often used in academic and scientific research.
- Acknowledge the essential accounting theories dictating the determinations between capitalizing and expensing.
- Investigate how purchased intangible assets, including patents and goodwill, are treated in accounting.
Verified Answer
SW
simran waliaMay 30, 2024
Final Answer :
B
Explanation :
Capitalizing purchased goodwill is supported by the reliability characteristic, as it involves using objective and verifiable information (i.e. the cost of the purchase) to record the asset on the balance sheet. Relevance and decision usefulness are also important characteristics, but do not specifically support capitalizing purchased goodwill. Understandability is not relevant to this question.
Learning Objectives
- Acknowledge the essential accounting theories dictating the determinations between capitalizing and expensing.
- Investigate how purchased intangible assets, including patents and goodwill, are treated in accounting.
Related questions
The Jared Corporation Is Contemplating the Acquisition of the Jonathan ...
The Jessie Company Acquired a Competitor Company in January 2010 ...
Which of the Following Is Not True Regarding the Accounting ...
Smith Corporation Is Interested in Acquiring Dawson Company and Has \( ...
Which of the Following Is an Intangible Asset That Is ...