Under the purchase accounting method,
A)goodwill must be amortized straight-line over the target firm's estimated life.
B)acquired assets are recorded based on their target firms' book values.
C)goodwill always remains on the acquirer's books at its original value.
D)goodwill will generally be a long-term liability on the acquirer's books.
E)acquired assets are recorded at fair market value.

Question

Quizplus · Accepted Answer

Under the purchase accounting method, acquired assets are recorded at fair market value, which includes any goodwill generated by the acquisition. Goodwill is no longer amortized but is subject to annual impairment testing to ensure that its value has not been impaired. Therefore, options A, B, C, and D are incorrect.

Under the Purchase Accounting Method