What is goodwill in accounting?

A The value of inventory

B The excess of purchase price over the fair value of identifiable net assets acquired

C The companys reputation only

D The cost of advertising

✓ Correct Answer: Option B

Goodwill = Purchase price − Fair value of net identifiable assets. It represents intangible value like brand and customer base.

💡 Why is B) the correct answer?

The correct answer to the question "What is goodwill in accounting?" is Option B: The excess of purchase price over the fair value of identifiable net assets acquired.

The other options — A) The value of inventory, C) The companys reputation only, D) The cost of advertising — are incorrect for this CPA Exam Prep question. As explained above: Goodwill = Purchase price − Fair value of net identifiable assets. It represents intangible value like brand and customer base.

📚 About This CPA Exam Prep Practice Question

This 2-level CPA Exam Prep question from the Financial Accounting (FAR) topic is part of BrainForge Quiz's free exam preparation library. Each question includes the correct answer and a detailed explanation to help you understand the underlying concept, not just memorize the answer.

How to use this page: Read the question above, consider all four options (A through D), then check the highlighted correct answer and explanation. For active timed practice, start a free CPA Exam Prep practice test or use flashcards for spaced repetition review.

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What is goodwill in accounting?

✓ Correct Answer: Option B

📚 About This CPA Exam Prep Practice Question

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