Test Bank for Advanced Accounting, 13th edition (Floyd Beams, 2017), Chapter 1-23 | All Chapters

TEST BANK
Advanced Accounting, 13th edition
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By Floyd Beams, Joseph Anthony
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, Table of Content

Business Combinations
Stock Investments–Investor Accounting and Reporting
An Introduction to Consolidated Financial Statements
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Consolidation Techniques and Procedures
Intercompany Profit Transactions–Inventories
Intercompany Profit Transactions–Plant Assets
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Intercompany Profit Transactions–Bonds
Consolidations–Changes in Ownership Interests
Indirect and Mutual Holdings
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Subsidiary Preferred Stock, Consolidated Earnings per Share, and Consolidated Income
Taxation

Consolidation Theories, Push-Down Accounting, and Corporate Joint Ventures
Derivatives and Foreign Currency: Concepts and Common Transactions
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Accounting for Derivatives and Hedging Activities
Foreign Currency Financial Statements
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Segment and Interim Financial Reporting
Partnerships–Formation, Operations, and Changes in Ownership Interests
Partnership Liquidation
Corporate Liquidations and Reorganizations
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An Introduction to Accounting for State and Local Governmental Units
Accounting for State and Local Governmental Units–Governmental Funds
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Accounting for State and Local Governmental Units–Proprietary and Fiduciary Funds
Accounting for Not-for-Profit Organizations
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Estates and Trusts
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TEST BANK FOR
Advanced Accounting, 13e (Beams et al.)
Chapter 1 Business Combinations
1.1 Multiple Choice Questions
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1) Which of the following is NOT a reason for a company to expand through a combination, rather than
by building new facilities?
A) A combination might provide cost advantages.
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B) A combination might provide fewer operating delays.
C) A combination might provide easier access to intangible assets.
D) A combination might provide an opportunity to invest in a company without having to take
responsibility for its financial results.
Answer: D
Objective: LO1.1 Understand the economic motivations underlying business combinations.
Difficulty: Easy
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AACSB: Analytical thinking

2) A business merger differs from a business consolidation because
A) a merger dissolves all but one of the prior entities, but a consolidation dissolve all of the prior entities
and forms a new corporation.
B) a consolidation dissolves all but one of the prior entities, but a merger dissolves all of the prior entities.
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C) a merger is created when two entities join, but a consolidation is created when more than two entities
join.
D) a consolidation is created when two entities join, but a merger is created when more than two entities
join.
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Answer: A
Objective: LO1.2 Learn about alternative forms of business combinations, from both the legal and accounting
perspectives.
Difficulty: Easy
AACSB: Analytical thinking

3) Following the accounting concept of a business combination, a business combination occurs when a
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company acquires an equity interest in another entity and has
A) at least 20% ownership in the entity.
B) more than 50% ownership in the entity.
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C) 100% ownership in the entity.
D) control over the entity, irrespective of the percentage owned.
Answer: D
Objective: LO1.2 Learn about alternative forms of business combinations, from both the legal and accounting
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perspectives.
Difficulty: Easy
AACSB: Analytical thinking
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, 4) Historically, much of the controversy concerning accounting requirements for business combinations
involved the method.
A) purchase
B) pooling of interests
C) equity
D) acquisition
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Answer: B
Objective: LO1.2 Learn about alternative forms of business combinations, from both the legal and accounting
perspectives.
Difficulty: Easy
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AACSB: Analytical thinking

5) Pitch Co. paid $50,000 in fees to its accountants and lawyers in acquiring Slope Company. Pitch will
treat the $50,000 as
A) an expense for the current year.
B) a prior period adjustment to retained earnings.
C) additional cost to investment of Slope on the consolidated balance sheet.
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D) a reduction in additional paid-in capital.
Answer: A
Objective: LO1.3 Introduce accounting concepts for business combinations, emphasizing the acquisition method.
Difficulty: Moderate
AACSB: Application of knowledge
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6) Picasso Co. issued 5,000 shares of its $1 par common stock, valued at $100,000, to acquire shares of
Seurat Company in an all-stock transaction. Picasso paid the investment bankers $35,000 and will treat
the investment banker fee as
A) an expense for the current year.
B) a prior period adjustment to Retained Earnings.
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C) additional goodwill on the consolidated balance sheet.
D) a reduction to additional paid-in capital.
Answer: D
Objective: LO1.3 Introduce accounting concepts for business combinations, emphasizing the acquisition method.
Difficulty: Moderate
AACSB: Application of knowledge
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7) Durer Inc. acquired Sea Corporation in a business combination and Sea Corp. went out of existence.
Sea Corp. developed a patent listed as an asset on Sea Corp.'s books at the patent office filing cost. In
recording the combination,
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A) fair value is not assigned to the patent because the research and development costs have been
expensed by Sea Corp.
B) Sea Corp.'s prior expenses to develop the patent are recorded as an asset by Durer at purchase.
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C) the patent is recorded as an asset at fair market value.
D) the patent's market value increases goodwill.
Answer: C
Objective: LO1.4 See how firms record fair values of assets and liabilities in an acquisition.
Difficulty: Moderate
AACSB: Analytical thinking
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