Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 9 - Reporting and Analyzing Long-Lived Assets - Questions - Page 483: 20


Companies record goodwill only when there is an exchange transaction that involves the purchase of entire business. When entire business is purchase, Goodwill is the amount paid in excess of the fair market value of assets acquired. Goodwill is not amortized because it is considered to have an indefinite life. However, it must be written down if a company determines the value of goodwill has been permanently impaired.

Work Step by Step

The accounting entry for amortization of goodwill is as under: Amortization expense – Goodwill dollars XXX Goodwill dollars XXX (To record Goodwill amortization)
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