Series 79 practice questionhardImpairment of Goodwill
If a company determines that goodwill on its balance sheet is impaired, what is the impact on its financial statements?
- AIncrease in assets and equity
- BDecrease in assets and net income✓ Correct answer
- CNo effect on any financial statement
- DIncrease in liabilities
Explanation
Why B — Decrease in assets and net income
Goodwill impairment reduces assets and is recognized as an expense, lowering net income. It does not affect liabilities or increase assets/equity.
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