Parent and Sub Inc

question 39

Multiple Choice

Parent and Sub Inc. had the following balance sheets on December 31, 2012: On January 1, 2013 Parent purchased all of Sub Inc.'s Common Shares for $40,000 in cash. On that date, Sub's Current Assets and Fixed Assets were worth $26,000 and $54,000, respectively. Assuming that Consolidated Financial Statements were prepared on that date, answer the following: The Goodwill arising from this Business Combination would be:

• A) ($17,000).
• B) $7,000.
• C) $17,000.
• D) $120,000.

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Definitions:

Historical Comparisons

The analysis of past data to identify trends, patterns, or changes over time, often used in financial analysis.

Competition Comparisons

An analysis technique used by companies to evaluate their position relative to competitors in the market, focusing on strengths, weaknesses, opportunities, and threats.

Market Value Ratios

Financial metrics used to evaluate the attractiveness of an investment by comparing its share price to various per-share financial metrics.

Liquidity Ratios

Financial metrics used to determine a company's ability to meet its short-term debt obligations.