Gribble Corporation acquires the Dibble Corporation for $7,200,000.On appraisal, the assets of Dibble Corporation have a fair market value of $6,800,000.The excess of the purchase price over the fair market value of the assets:
A)Can be apportioned to the assets based on their relative fair market value.
B)Is goodwill that is amortized over 15 years.
C)Is goodwill that is amortized over 40 years.
D)Must be capitalized until Dibble is sold.

Question

Quizplus · Accepted Answer

The excess of the purchase price over the fair market value of the acquired company's assets is recognized as goodwill. According to U.S. GAAP, goodwill is not amortized but is tested annually for impairment. However, for tax purposes, goodwill is amortized over 15 years.

Gribble Corporation Acquires the Dibble Corporation for $7,200,000