goodwill
capital reserve
minority interest
none of the above
Answer is Right!
Answer is Wrong!
The correct answer is: A. goodwill
Goodwill is an intangible asset that arises when a company acquires another company for more than the fair value of its net assets. It is often referred to as the “premium” that the acquiring company pays for the target company’s brand, customer base, or other intangible assets.
Goodwill is recorded on the acquiring company’s balance sheet as an intangible asset. It is amortized over a period of 10 years, or less if the company can demonstrate that it will have a shorter useful life.
Goodwill is a significant asset for many companies. In 2018, the total goodwill on the balance sheets of U.S. companies was over $2 trillion.
Here are brief explanations of each option:
- Capital reserve is a reserve that is created when a company receives more money from the sale of shares than the fair value of the assets that it is selling. This reserve is not considered to be an asset, and it is not used to offset liabilities.
- Minority interest is the portion of a company’s equity that is owned by minority shareholders. This interest is not considered to be an asset of the company, and it is not used to offset liabilities.
- None of the above is not a correct answer to the question.