On November 30, 2016, Piani Incorporated Purchased for Cash of $25

question 34

Multiple Choice

On November 30, 2016, Piani Incorporated purchased for cash of $25 per share all 400,000 shares of the outstanding common stock of Surge Company. Surge 's balance sheet at November 30, 2016, showed a book value of $8,000,000. Additionally, the fair value of Surge's property, plant, and equipment on November 30, 2016, was $1,200,000 in excess of its book value. What amount, if any, will be shown in the balance sheet caption "Goodwill" in the November 30, 2016, consolidated balance sheet of Piani Incorporated, and its wholly owned subsidiary, Surge Company?

• A) $0.
• B) $800,000.
• C) $1,200,000.
• D) $2,000,000.

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Definitions:

Investment

An asset or item acquired with the goal of generating income or appreciation.

Net Present Value

The difference between the present value of cash inflows and outflows over a period of time, used in capital budgeting to assess the profitability of investments.

Investment

The allocation of resources, such as capital or time, with the expectation of achieving a future return or profit.

Net Present Value

The variance in the present value of cash entering and leaving over a specified period.