During a recent management meeting, Ralph Dale, director of marketing, proposed that the company begin capitalizing its

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During a recent management meeting, Ralph Dale, director of marketing, proposed that the company begin capitalizing its marketing expenditures as goodwill. In his words, “Marketing expenditures create goodwill for the company which benefits the company for multiple periods. Therefore it doesn’t make good sense to have to expense it as it is incurred. Besides, if we capitalize it as goodwill we won’t have to amortize it, and this will boost reported income.” Discuss the merits of Ralph’s proposal.

Goodwill
Goodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of...
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Financial Accounting Tools for Business Decision Making

ISBN: 978-0470239803

5th Edition

Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso

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