Please write a case reply for each attached case, each reply must be at least 350 words in length. Your replies should be a substantive critique and add new information concerning the subject matter of your other classmates' cases. Each reply must cite at least 3 sources. Acceptable sources include peer-reviewed journal articles, FASB Codification, the textbook, and the Bible. Each Reply must be in APA format. If I get an A+ I will tip well.

\fRunning head: CASE 10-8 ACCOUNTING FOR GOODWILL Case 10-8 Accounting for Goodwill Discussion Board 4 Arlene Morial Dr. Wendy Achilles Advanced Financial Accounting Theory and Analysis Liberty University 1 CASE 10-8 ACCOUNTING FOR GOODWILL 2 CASE 10-8 ACCOUNTING FOR GOODWILL Kallus Corp., is an industry leader in the manufacture of toys. Each year, its design staff comes up with new ideas that are a great success. As a result, Kallus's sales and profits consistently exceed those of other toy manufacturers. Over the past 10 years, Kallus has earned average net profits of $ 189 million, compared to $122 million for the typical company in the toy industry. Required: Answer the following questions: A. Does Kallus have goodwill? Explain. Yes, Kallus has goodwill. Let me define Goodwill first - In accounting, goodwill is an intangible asset associated with a business combination. Goodwill is recorded when a company acquires (purchases) another company and the purchase price is greater than the combination or net of (1) the fair value of the identifiable and intangible assets acquired, and (2) the liabilities that were assumed (Averkamp, 2016). Kallus goodwill comes from research and development, always coming up with new toys keeping the customers excited about new products through their designs and new ideas. Through those skills that enhanced their designs they realized increased sales and their credibility which makes their value increase. Just to give summary of the information mentioned above that the Goodwill exists only when there is an acquisition of ownership or shares in the company or in a corporation and if the purchase price is higher than the net fair value acquired. The value of goodwill is not recognized or recorded until the business is sold. B. Is goodwill an asset? Explain. (Does it meet the definition of an asset found in SFAS No. 6?) CASE 10-8 ACCOUNTING FOR GOODWILL 3 Yes, goodwill is an asset recorded as intangible asset and categorized under long-term current asset and it does meet the definition of an asset that can be found at SFAS No 6 that goodwill has a future economic benefit. Definition of assets under SFAS No. 6 - Assets are probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events (FASB, 1985). There are three (3) necessary qualities for an asset to be qualified: (1) It comprises the possibilities that include the measurement, alone or in association with other assets, to provide something straightforward or not straightforward to the possibilities of net cash inflows. (2) The identified thing can acquire profit gained from something and control other's access to it, and; (3) The affair or other event permitting growth to the enterprise's right to supervise or authority of the benefit has already acquired. C. If you believe Kallus has goodwill, how would you go about measuring it? Explain. Yes, I do believe Kallus has goodwill and somehow difficult to measure accurately, subject to change, mostly used when assets are being sold or purchased. The value of the assets exchanged indicates a total fair value for the business entity acquired. The excess of total fair value over the fair value of identifiable net assets is considered goodwill (Schroeder, et. al., p. 357, 2014). D. Should Kallus Corp. report goodwill in the balance sheet: Why, or why not? Yes, Kallus Corporation should report the goodwill in the balance sheet and make disclosures only after the acquisition or purchases happened. All accounts that qualify to be an asset, liabilities and equity or earnings of the company should show or be included in the balance for that period. Goodwill being part of an asset and recorded as intangible asset should be included or part in the balance sheet. Goodwill should be disclosed under SFAS 142 that include the following: CASE 10-8 ACCOUNTING FOR GOODWILL 4 o The total aggregative amount of goodwill is to be disclosed as a separate line item on the balance sheet. o Any transitory impairment loss is to be reported as a change in accounting principle. o Any annual impairment loss is to be disclosed as a separate line item on the income statement. o A description of the impaired asset and the facts and circumstances that led to the impairment is to be disclosed. o The amount of the impairment loss and a description of the method used to determine the fair value of its reporting units are to be disclosed (Schroeder, et. al., p. 360, 2014). What would be the Christians worldview for this organization? Just like what the bible says in 2 Corinthians chapter 8 verse 7 \"7 But since you excel in everythingin faith, in speech, in knowledge, in complete earnestness and in the love we have kindled in you[a]see that you also excel in this grace of giving.\" It is our responsible as a Christian to excel in everything as God is calling us to do, to be not be contented in only what we can do but to strive to give our best or everything as God give his best for us to have salvation that we are enjoying right now through His son Jesus our savior who claimed our sins by dying on the cross. Because Kallus company loves to excel and improve their product constantly and our God sees their effort to be the best and increase their knowledge that can make their company improve their assets as they increase their investors through their earnestness to create new inventions and designs every year. CASE 10-8 ACCOUNTING FOR GOODWILL Reference Averkamp, H. (2016). What is Goodwill? Accounting Coach. Retrieved from http://www.accountingcoach.com/blog/what-is-goodwill Bible Gateway, New International Version. (2011). The Collection for the Lord's People. Bible Gateway. Retrieved from https://www.biblegateway.com/passage/? search=2+Corinthians+8&version=NIV FASB. (1985). How to Write Off a Bad Debt? Statement of Financial Accounting Concepts No. 6. Retrieved from http://www.fasb.org/resources/ccurl/792/293/CON6.pdf Schroeder, R. G., Clark, M. W & Cathey, J. M., (2014). Goodwill. Advanced Financial Accounting Theory and Analysis, p. 356-357. Schroeder, R. G., Clark, M. W & Cathey, J. M., (2014). Disclosure Requirements of SFAS No. 142. Advanced Financial Accounting Theory and Analysis, p. 360. 5