On January 2, Year 1, Paye Co. purchased Shef Co. at a cost that resulted in recognition of goodwill of $200,000. During the first quarter of Year 1, Paye spent an additional $80,000 on expenditures designed to maintain goodwill. In its December 31, Year 1, balance sheet what amount should Paye report as goodwill?
a. $180,000
b. $252,000
c. $200,000
d. $280,000
Explanation
Choice "c" is correct. $200,000 of goodwill is capitalized as a component of the purchase of the other entity. $80,000 is expensed since it is an internal development of goodwill and cannot be capitalized. Goodwill is not amortized, but it is subject to an impairment test.
Choice "a" is incorrect. Goodwill is not amortized, but it is subject to an impairment test.
Choice "d" is incorrect. The $80,000 should not be capitalized.
Choice "b" is incorrect. The $80,000 should not be capitalized.
了解详情30000元/4科
