Parent and Sub Inc On January 1, 2019 Parent Purchased All of Sub Inc

question 46

Multiple Choice

Parent and Sub Inc. had the following balance sheets on December 31, 2018: $$\begin{array} { | l | l | l |} \hline & \text { Parent } & \text { Sub } \\\hline \text { Current Assets } & \$ 60,000 & \$ 10,000 \\\hline \text { Fixed Assets (net) } & \$ 100,000 & \$ 60,000 \\\hline \text { Total Assets } & \$ 160,000 & \$ 70,000 \\\hline\\\hline \text { Current Liabilities } & \$ 42,000 &\$ 35,000 \\\hline \text { Bonds Payable } & \$ 20,000 &\$ 12,000 \\\hline \text { Common Shares } & \$ 90,000 & \$ 12,000 \\\hline \text { Retained Earnings } & \$ 8,000 &\$ 11,000 \\\hline \text { Total Liabilities and Equity } & \$ 160,000 &\$70,000 \\\hline\end{array}$$
On January 1, 2019 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:

Raise Price

An action taken by producers or sellers to increase the cost at which goods or services are sold, often in response to market conditions.

Single Firm

Refers to an individual business entity that operates in a market, typically producing goods or services.

Monopoly

A market structure in which a single seller dominates the market for a particular good or service, without any close substitutes.

Monopolistic Industry

An industry dominated by a single firm that has control over pricing and the market, facing little to no competition.