An income statement is a report on a company’s financial performance over a period of time. The measure of an amount that a company has earned during a period of time is known as net income.

The income statement is the financial representation of the operating activities of a company during a period of time. Net income is the measure of an amount that a company has earned during a period of time. In an income statement the line items of revenues, expenses, gains, and losses in a bid provide an explanation of how a firm earned its net income.

Instructions

1. What is goodwill?

2. When should a firm measure it and how does it affect that firm’s reported net income, if at all?