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Goodwill is the added value of a successful business that is attributable to factors that enable...

Goodwill is the added value of a successful business that is attributable to factors that enable the business to earn above-average profits. T/F

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Answer #1

Answer:- True

Reason:- Goodwill is recognised in the books when there is a synergy on acquiring the business for a price less than the fair value of its books assets. For example lets say Company A owns 10 stores across USA, the fair value of its net assets (That is all its assets minus liabilities) is $1,000,000. But the seller is ready to pay $1,500,000 which is $500,000 extra, for sure the buyer will not give this extra amount without realising any benefit. This intangible benefit which is not in Company A's books is its goodwill. This could be due to brand value, existing customer loyalty, strategic locations, great products etc. This added value will surely help in earning above average profits.

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