Question: Case 1 0 - 9 Accounting for Goodwill Kallus Corp. is an industry leader in the manufacture of toys. Each year, its design staff comes

Case

10 - 9

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. b

.

Is goodwill an asset? Explain.

(

Does it meet the definition of an asset found in SFAS No

. 6 ?)

.

If you believe Kallus has goodwill, how would you go about measuring it

?

Explain. d

.

Should Kallus Corp. report goodwill in the balance sheet? Why, or why not?

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