Which of the following is an intangible asset and a measure of a firm's superior earning power?

Assessment: JAMB UTME - Principles of Accounts - 1998 Subject: Financial Accounting

Question 1 Report

Which of the following is an intangible asset and a measure of a firm's superior earning power?
Answer Details
Goodwill is an intangible asset and a measure of a firm's superior earning power. Goodwill represents the difference between the amount paid for a company during an acquisition and its net tangible assets (assets that can be physically touched or quantified). It arises when a company is acquired for a price that exceeds the fair value of its net assets, and reflects the value of its reputation, customer base, brand, and other intangible factors that contribute to its future earnings potential. Therefore, option B (Goodwill) is the correct answer.
Read lesson note on Nature And Significance Of Accounting (JAMB)
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