The 3M balance sheets in Exhibit show goodwill of $6,820 million in 2010 and $7,047 million in

Question:

The 3M balance sheets in Exhibit show goodwill of $6,820 million in 2010 and $7,047 million in 2011.

1. Goodwill increased $227 million or 3.3% from 2010 to 2011. What does this increase tell you about the activities of 3M during the year ended December 31, 2011?

2. Suppose you calculated various ratios for 3M for the year ended December 31, 2011. If you worked problem you actually calculated many ratios. This problem does not require use of specific computations. However, you might review problem 12-46 as a reminder of the ratios that might be impacted. Assume you have been asked to compute these same ratios for 2010. Would the increase in goodwill and the activities implied by that increase complicate the comparison of ratios over the 2 years in question? If so, why?

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...