How is a one time loss due to an old strike treated in goodwill valuation?

Correct answer: It will be added back as abnormal loss

The direct answer is option B: the one-time strike loss is treated as an abnormal loss and added back. Goodwill valuation tries to measure the firm’s normal and continuing earning capacity. An old strike that caused a single, unusual loss is not expected to occur regularly. If that loss remains in the past profit, the profit will look smaller than the firm’s normal earning ability. The steps are: identify the strike loss; decide that it is abnormal because it is one-time; add it back to the reported profit to obtain adjusted normal profit; then use the adjusted profit in the goodwill calculation. Option B is correct because adding back the abnormal loss removes its temporary effect. Option A is wrong because leaving it as a normal loss would understate maintainable profit and goodwill. Option C is wrong because the amount is not directly deducted from goodwill; it first adjusts the profit figure. Option D is wrong because a strike loss is not capital merely because it is unusual; it is a revenue loss for profit adjustment. The memory cue is: abnormal loss is added back, while abnormal gain is deducted, when finding normal profit. This rule applies only when the event is genuinely unusual and not a regular business cost.