diff --git a/packages/@angular/cli/utilities/find-parent-module.ts b/packages/@angular/cli/utilities/find-parent-module.ts
index 7a2273e19068..92ce70970129 100644
--- a/packages/@angular/cli/utilities/find-parent-module.ts
+++ b/packages/@angular/cli/utilities/find-parent-module.ts
@@ -2,25 +2,38 @@ import * as fs from 'fs';
 import * as path from 'path';
 const SilentError = require('silent-error');
 
+/**
+ * Find the path to the first module, moving up through the directory tree from
+ * currentDir.
+ *
+ * @export
+ * @param {*} project - the project definition.
+ * @param {string} currentDir - a relative path from the project root.
+ * @returns {string} the relative path to the first module above currentDir from the project root.
+ */
 export default function findParentModule(project: any, currentDir: string): string {
-  const sourceRoot = path.join(project.root, project.ngConfig.apps[0].root, 'app');
 
   // trim currentDir
-  currentDir = currentDir.replace(path.join(project.ngConfig.apps[0].root, 'app'), '');
+  currentDir = currentDir.replace(project.root, '');
 
-  let pathToCheck = path.join(sourceRoot, currentDir);
+  // normalize to project.root
+  let pathToCheck = path.join(project.root, currentDir);
 
-  while (pathToCheck.length >= sourceRoot.length) {
+  function isModule(fileName: string) {
     // TODO: refactor to not be based upon file name
-    const files = fs.readdirSync(pathToCheck)
-      .filter(fileName => !fileName.endsWith('routing.module.ts'))
-      .filter(fileName => fileName.endsWith('.module.ts'))
-      .filter(fileName => fs.statSync(path.join(pathToCheck, fileName)).isFile());
+      return !fileName.endsWith('routing.module.ts') &&
+          fileName.endsWith('.module.ts') &&
+          fs.statSync(path.join(pathToCheck, fileName)).isFile();
+  }
+
+  while (pathToCheck.length >= project.root.length) {
+    const files = fs.readdirSync(pathToCheck).filter(isModule);
 
     if (files.length === 1) {
       return path.join(pathToCheck, files[0]);
     } else if (files.length > 1) {
-      throw new SilentError(`Multiple module files found: ${pathToCheck.replace(sourceRoot, '')}`);
+      throw new SilentError(`Multiple module files found:
+        ${pathToCheck.replace(project.root, '')}`);
     }
 
     // move to parent directory
diff --git a/tests/acceptance/find-parent-module.spec.ts b/tests/acceptance/find-parent-module.spec.ts
new file mode 100644
index 000000000000..bf097358146f
--- /dev/null
+++ b/tests/acceptance/find-parent-module.spec.ts
@@ -0,0 +1,126 @@
+'use strict';
+
+const mockFs = require('mock-fs');
+
+import * as ts from 'typescript';
+import * as path from 'path';
+import * as dependentFilesUtils from '@angular/cli/utilities/get-dependent-files';
+
+import { expect } from 'chai';
+import findParentModule from '@angular/cli/utilities/find-parent-module';
+
+describe('findParentModule', () => {
+  const project = {
+    root: 'project',
+    ngConfig: {
+      apps: [
+        { root: 'src' },
+      ],
+    },
+  };
+
+  const mockDrive = {
+    'project': {
+      'src': {
+        'app': {
+          'app.module.ts': ``,
+          'app.routing.module.ts': ``,
+          'component': {},
+          'child-module': {
+            'child-module.module.ts': ``,
+            'child-module.routing.module.ts': ``,
+            'child-module-component': {},
+          },
+          'router-module': {
+            'router-module.routing.module.ts': ``
+          }
+        },
+        'myapp': {
+          'myapp.module.ts': ``,
+          'myapp.routing.module.ts': ``,
+          'component': {},
+          'child-module': {
+            'child-module.module.ts': ``,
+            'child-module.routing.module.ts': ``,
+            'child-module-component': {},
+          },
+          'router-module': {
+            'router-module.routing.module.ts': ``
+          }
+        }
+      }
+    }
+  }
+
+  const apps = [
+    { root: 'src',  subfolder: 'app' },
+    { root: 'src',  subfolder: 'myapp' }
+  ];
+
+  beforeEach(() => {
+    mockFs(mockDrive);
+  });
+
+  afterEach(() => {
+    mockFs.restore();
+  });
+
+  describe('Finds parent module', () => {
+    it('throws and error if not in an application folder', () => {
+      let currentDir = '';
+      expect(() => {
+        let parentModule = findParentModule(project, currentDir);
+        // if for some reason it doesn't throw.. expect undefined
+        // in hopes of logging something useful.
+        expect(parentModule).to.equal(undefined);
+      }).to.throw();
+    });
+
+    apps.forEach((app) => { testApp(app)});
+  });
+
+  function testApp(app: Object) {
+    describe('module in folder '+ app.subfolder, () => {
+      it('works for root folder', () => {
+        let currentDir = path.join(app.root, app.subfolder);
+        expect(() => {
+          let parentModule = findParentModule(project, currentDir);
+          expect(parentModule).to.equal(path.join(project.root, app.root, app.subfolder, app.subfolder +'.module.ts'));
+        }).to.not.throw();
+      });
+
+      it('works from an app component folder', () => {
+        let currentDir = path.join(app.root, app.subfolder, 'component');
+        expect(() => {
+          let parentModule = findParentModule(project, currentDir);
+          expect(parentModule).to.equal(path.join(project.root, app.root, app.subfolder, app.subfolder +'.module.ts'));
+        }).to.not.throw();
+      });
+
+      it('ignores router modules', () => {
+          let currentDir = path.join(app.root, app.subfolder, 'router-module');
+          expect(() => {
+            let parentModule = findParentModule(project, currentDir);
+            expect(parentModule).to.equal(path.join(project.root, app.root, app.subfolder, app.subfolder + '.module.ts'));
+          }).to.not.throw();
+      });
+
+      it('works from a child module', () => {
+        let currentDir = path.join(app.root, app.subfolder, 'child-module');
+        expect(() => {
+          let parentModule = findParentModule(project, currentDir);
+          expect(parentModule).to.equal(path.join(project.root, app.root, app.subfolder, 'child-module', 'child-module.module.ts'));
+        }).to.not.throw();
+      });
+
+      it('works from a component of a child module', () => {
+        let currentDir = path.join(app.root, app.subfolder, 'child-module', 'child-module-component');
+        expect(() => {
+          let parentModule = findParentModule(project, currentDir);
+          expect(parentModule).to.equal(path.join(project.root, app.root, app.subfolder, 'child-module', 'child-module.module.ts'));
+        }).to.not.throw();
+      });
+    });
+  }
+
+});