When an investor purchases sufficient common stock to gain significant influence over the investee,what is the proper accounting treatment of any excess of cost over book value acquired?

Question

Quizplus · Accepted Answer

When an investor purchases sufficient common stock to gain significant influence over the investee, any excess of cost over book value acquired should be amortized over the period of time that is reasonable in light of the underlying cause of the excess. This excess is referred to as goodwill and represents the value of expected future benefits that are not recognized as assets or liabilities on the investee's books. Amortizing goodwill over time reflects the fact that the value of these future benefits is expected to be realized over a period of time rather than immediately. Thus, choice C is the correct option.

When an Investor Purchases Sufficient Common Stock to Gain Significant