The following data pertains to questions
Parent and Sub Inc had the following balance sheets on July 31,2007: The Net Incomes for Parent and Sub Inc for the year ended July 31,2007 were $120,000 and $60,000 respectively.
-Assuming once again that the Proprietary Theory was applied,what would be the amount of Goodwill appearing on the Consolidated Balance Sheet on the Date of acquisition,assuming once again that Parent purchased 80% of Sub Inc.for $180,000?
A)$26,000
B)$130,000
C)Nil
D)Cannot be determined from the information given.

Question

The following data pertains to questions 
Parent and Sub Inc had the following balance sheets on July 31,2007:  The Net Incomes for Parent and Sub Inc for the year ended July 31,2007 were $120,000 and $60,000 respectively.
-Assuming once again that the Proprietary Theory was applied,what would be the amount of Goodwill appearing on the Consolidated Balance Sheet on the Date of acquisition,assuming once again that Parent purchased 80% of Sub Inc.for $180,000?
A)$26,000 
B)$130,000 
C)Nil 
D)Cannot be determined from the information given.

Quizplus · Accepted Answer

Since the Proprietary Theory was applied, Goodwill would only appear on the Consolidated Balance Sheet if it was purchased. However, no information is given to suggest that Parent purchased any Goodwill from Sub Inc. Therefore, the amount of Goodwill on the Consolidated Balance Sheet would be Nil.

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