On January 1,2012,Parrot Company Acquired All of the Stock of a Subsidiary.The

question 6

Multiple Choice

On January 1,2012,Parrot Company acquired all of the stock of a subsidiary.The following data is available:
$\begin{array}{ll}&\text { Parrot Company } & \text { Subsidiary } \\ \text {Total assets }&\$ 650 & \$ 400 \\ \text { Total liabilities }&\$ 200 & \$ 190 \\ \text { Total stockholders' equity}&\$ 450 & \$ 210\end{array}$
The acquisition by the Parrot Company represents a 100 percent interest in the subsidiary.On January 1,2012,the fair value of the subsidiary's assets and liabilities are equal to their book value.Parrot Company paid $450 for the 100 percent interest in the subsidiary.What amount of goodwill is implied in the purchase?

• A) $0
• B) $10
• C) $200
• D) $240

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Definitions:

Rates of Return

A measure of the profit or loss of an investment over a specified period, usually expressed as a percentage of the initial investment.

Equity Returns

The profit or loss generated on an investment in equity, represented as a percentage of the investment's initial cost.

Interest

The charge for borrowing money, typically expressed as an annual percentage rate.

Debt Investments

Financial instruments that represent a loan made by an investor to a borrower, typically used by corporations, municipalities, and sovereign governments to finance projects and operations.