Marvin Company purchased Marathon Company on August 31st,2016 and recorded goodwill.How will Marvin Company account for this goodwill in future accounting periods?

Question

Quizplus · Accepted Answer

According to accounting standards, goodwill is not amortized but instead is subject to an annual impairment test. If the value of goodwill decreases, the company will need to write down the value and record an impairment loss. Therefore, if the goodwill is impaired in subsequent years, Marvin Company will decrease the Goodwill account. Option A is incorrect because goodwill is not typically amortized. Option B is incorrect as an increase in goodwill is only possible if Marvin Company acquires another company or if there is a revaluation of assets. Option D is incorrect because the value of goodwill may change due to changes in the underlying business or market conditions.

Marvin Company Purchased Marathon Company on August 31st,2016 and Recorded