Question

Quiche & Tell, Inc. has discovered that its goodwill has been impaired because the secret recipe it received when it purchased its competitors is no longer a secret. Recording this impairment will

Answer 1

Recording impairment of goodwill due to Quiche & Tell, Inc.'s secret recipe being exposed will lead to an impairment loss on the income statement, reducing the company's net income for the period.

Step-by-step explanation:

Recording the impairment of goodwill in Quiche & Tell, Inc.'s financial statements involves writing down the carrying value of the goodwill to reflect its reduced worth. Goodwill impairment typically occurs when the fair value of the reporting unit, which includes the goodwill, falls below its carrying amount on the balance sheet.

Because the secret recipe that constituted part of Quiche & Tell, Inc.'s goodwill is no longer a secret, its economic benefit to the company has diminished, leading to an impairment loss. This impairment loss should be reported on the income statement, which will reduce the company's net income for the period in which the impairment is recognized.