Question

1.True or false:

-Negative goodwill on a business acquisition should not be reported as a negative asset in the statement of financial position.

-An associate company can be defined as a company in which another company can exert a significant influence over its operating and financial policies.

-An associate company is one in which an investing company has a substantial but not a controlling interest.

2. In a consolidation where an associate is consolidated using the equity method of​ accounting, goodwill:

a) should be amortised over the expected period the investment will be held

b)must be disclosed separately from goodwill that arises on acquisition of subsidiaries

c) is not disclosed

3. A company paid 5$ million to acquire a brand name for a product that complemented products sold in its existing markets. Although there is no active market in that asset it is permitted to report the brand name as an asset for which two of the following​ reasons? Choose 2:

a)It was of a material value

b)Its cost has been established by a market transaction

c)It is a name that is expected to result in a significant increase in profits

d) Future economic benefits from it are probable

Answer 1

1)False, Negative goodwill on a business acquisition should be reported as a gain in the statement of financial position.-

True -An associate company can be defined as a company in which another company can exert a significant influence over its operating and financial policies.

True -An associate company is one in which an investing company has a substantial but not a controlling interest.

2)a) should be amortised over the expected period the investment will be held

3) Answer

c)It is a name that is expected to result in a significant increase in profits

d) Future economic benefits from it are probable