Asked by Caroline Bachus on May 10, 2024
Verified
The Jessie Company acquired a competitor company in January 2010.When Jessie's accountant recorded the purchase, she correctly recorded an amount for goodwill based on the expectation of the acquired company's earning a rate of return on its assets that was in excess of the industry's rate of return.In fact, the acquired company doubled the expected rate of return in 2010 and 2011.As a result of these increased earnings, in early 2012 the president of the Jessie Company asked the company's accountant to increase the amount recognized as goodwill.
Required:
Goodwill
An intangible asset that arises when a business is purchased for more than the fair value of its net identifiable assets.
Rate of Return
A measure of the profitability of an investment expressed as a percentage of the original investment.
- Differentiate between GAAP and IFRS treatments of goodwill, including impairment and amortization.
- Analyze the accounting treatment for purchased intangible assets, including patents and goodwill.
Verified Answer
AM
Learning Objectives
- Differentiate between GAAP and IFRS treatments of goodwill, including impairment and amortization.
- Analyze the accounting treatment for purchased intangible assets, including patents and goodwill.
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