,Chapter li1 Intercorporate liAcquisitions liand liInvestments liin liOther liEntities
1) Assuming lino li impairment li in livalue liprior lito litransfer, liassets litransferred liby lia liparent
licompany litoia l nother lientity liit li has licreated lishould li be lirecorded liby lithe linewly licreated
lientity liat lithe liassets':
A) cost lito lithe liparent licompany.
B) book livalue lion lithe liparent licompany's libooks liat lithe lidate liof litransfer.
C) fair livalue liat lithe lidate liof litransfer.
D) fair livalue liof liconsideration liexchanged liby lithe linewly licreated lientity.
Answer: li B
liDifficulty: li1
liEasy
Topic: l i Internal liExpansion: liCreating lia liBusiness liEntity; liValuation liof liBusiness liEntities
liLearning liObjective: 01-01 liUnderstand liand liexplain lithe lireasons lifor liand lidifferent
limethods liof libusiness liexpansion, lithe litypes liof liorganizational listructures, liand lithe litypes
liof liacquisitions.; li01-03ilMake licalculations liand liprepare lijournal lientries lifor lithe licreation
liof lia libusiness lientity.
Bloom's: Remember
liAACSB: Reflective
liThinkingilAICPA: FN
liDecision liMaking
2) Given lithe liincreased lidevelopment liof licomplex libusiness listructures, liwhich liof lithe
lifollowingilregulators liis liresponsible li for lithe licontinued liusefulness liof liaccounting
lireports?
A) Securities liand liExchange liCommission li(SEC)
B) Public liCompany liAccounting liOversight liBoard li(PCAOB)
C) Financial liAccounting liStandards liBoard li(FASB)
D) All liof lithe liother lianswers liare licorrect
Answer: li D
liDifficulty: li1
liEasy
Topic: An liIntroduction lito liComplex liBusiness liStructures
Learning liObjective: 01-01 liUnderstand liand liexplain lithe lireasons lifor liand lidifferent
limethods liofilbusiness liexpansion, lithe litypes liof liorganizational listructures, liand lithe litypes
liof liacquisitions.
Bloom's: Remember
liAACSB: Reflective
liThinkingilAICPA: FN
liReporting
3) A libusiness licombination liin liwhich lithe liacquired licompany's liassets liand liliabilities liare
licombinediwl ith lithose liof lithe liacquiring licompany liinto li a lisingle lientity liis lidefined lias:
A) Stock liacquisition
B) Leveraged libuyout
C) Statutory liMerger
D) Reverse listatutory lirollup
,Answer: li C
liDifficulty: li1
liEasy
Topic: Organizational liStructure liand liFinancial liReporting
Learning liObjective: 01-04 liUnderstand liand liexplain lithe lidifferences libetween lidifferent
liforms liofilbusiness licombinations.
Bloom's: Remember
liAACSB: Reflective
liThinkingilAICPA: FN
liDecision liMaking
4) In liwhich liof lithe lifollowing lisituations lido liaccounting listandards linot lirequire lithat lithe
lifinancialilstatements liof lithe liparent li and lisubsidiary libe liconsolidated?
A) A licorporation licreates lia linew li100 lipercent liowned lisubsidiary
B) A licorporation lipurchases li90 lipercent liof lithe livoting listock liof lianother licompany
C) A licorporation lihas liboth licontrol liand li majority liownership liof lian liunincorporated licompany
D) A licorporation liowns liless-than lia licontrolling liinterest liin lian liunincorporated licompany
Answer: li D
liDifficulty: li1
liEasy
Topic: Organizational liStructure liand liFinancial liReporting
Learning liObjective: 01-01 liUnderstand liand liexplain lithe lireasons lifor liand lidifferent
li methods liofilbusiness liexpansion, lithe litypes liof liorganizational listructures, liand lithe litypes
liof liacquisitions.
Bloom's: Remember
liAACSB: Reflective
liThinkingilAICPA: FN
liDecision liMaking
During liits liinception, liDevon liCompany lipurchased liland lifor li$100,000 liand lia libuilding lifor
li$180,000. liAfter liexactly li3 liyears, liit litransferred lithese liassets liand licash liof li$50,000 lito lia
linewly licreated lisubsidiary,ilRegan liCompany, liin liexchange lifor li15,000 lishares liof liRegan's li$10
lipar livalue listock. liDevon liuses listraight-line lidepreciation. liUseful lilife lifor lithe libuilding liis
li30 liyears, liwith lizero liresidual livalue. liAn liappraisal lirevealed lithat lithe libuilding li has lia lifair
li value liof li$200,000.
5) Based lion lithe liinformation liprovided, liat lithe litime liof lithe litransfer, liRegan liCompany lishould
li record:
A) Building liat li$180,000 liand lino liaccumulated lidepreciation.
B) Building liat li$162,000 liand lino liaccumulated lidepreciation.
C) Building liat li$200,000 liand liaccumulated lidepreciation liof li$24,000.
D) Building liat li$180,000 liand liaccumulated lidepreciation liof li$18,000.
Answer: l i D
liDifficulty: li2
liMedium
Topic: Valuation liof liBusiness liEntities; liAccounting lifor liInternal liExpansion: liCreating
liBusinessilEntities
Learning liObjective: 01-04 liUnderstand liand liexplain lithe lidifferences libetween lidifferent
liforms liof libusiness licombinations.; li01-03 liMake licalculations liand liprepare lijournal lientries
, lifor lithe licreation liof liaib
l usiness lientity.
Bloom's: Understand
liAACSB: Analytical
liThinkingilAICPA: FN
liMeasurement
1) Assuming lino li impairment li in livalue liprior lito litransfer, liassets litransferred liby lia liparent
licompany litoia l nother lientity liit li has licreated lishould li be lirecorded liby lithe linewly licreated
lientity liat lithe liassets':
A) cost lito lithe liparent licompany.
B) book livalue lion lithe liparent licompany's libooks liat lithe lidate liof litransfer.
C) fair livalue liat lithe lidate liof litransfer.
D) fair livalue liof liconsideration liexchanged liby lithe linewly licreated lientity.
Answer: li B
liDifficulty: li1
liEasy
Topic: l i Internal liExpansion: liCreating lia liBusiness liEntity; liValuation liof liBusiness liEntities
liLearning liObjective: 01-01 liUnderstand liand liexplain lithe lireasons lifor liand lidifferent
limethods liof libusiness liexpansion, lithe litypes liof liorganizational listructures, liand lithe litypes
liof liacquisitions.; li01-03ilMake licalculations liand liprepare lijournal lientries lifor lithe licreation
liof lia libusiness lientity.
Bloom's: Remember
liAACSB: Reflective
liThinkingilAICPA: FN
liDecision liMaking
2) Given lithe liincreased lidevelopment liof licomplex libusiness listructures, liwhich liof lithe
lifollowingilregulators liis liresponsible li for lithe licontinued liusefulness liof liaccounting
lireports?
A) Securities liand liExchange liCommission li(SEC)
B) Public liCompany liAccounting liOversight liBoard li(PCAOB)
C) Financial liAccounting liStandards liBoard li(FASB)
D) All liof lithe liother lianswers liare licorrect
Answer: li D
liDifficulty: li1
liEasy
Topic: An liIntroduction lito liComplex liBusiness liStructures
Learning liObjective: 01-01 liUnderstand liand liexplain lithe lireasons lifor liand lidifferent
limethods liofilbusiness liexpansion, lithe litypes liof liorganizational listructures, liand lithe litypes
liof liacquisitions.
Bloom's: Remember
liAACSB: Reflective
liThinkingilAICPA: FN
liReporting
3) A libusiness licombination liin liwhich lithe liacquired licompany's liassets liand liliabilities liare
licombinediwl ith lithose liof lithe liacquiring licompany liinto li a lisingle lientity liis lidefined lias:
A) Stock liacquisition
B) Leveraged libuyout
C) Statutory liMerger
D) Reverse listatutory lirollup
,Answer: li C
liDifficulty: li1
liEasy
Topic: Organizational liStructure liand liFinancial liReporting
Learning liObjective: 01-04 liUnderstand liand liexplain lithe lidifferences libetween lidifferent
liforms liofilbusiness licombinations.
Bloom's: Remember
liAACSB: Reflective
liThinkingilAICPA: FN
liDecision liMaking
4) In liwhich liof lithe lifollowing lisituations lido liaccounting listandards linot lirequire lithat lithe
lifinancialilstatements liof lithe liparent li and lisubsidiary libe liconsolidated?
A) A licorporation licreates lia linew li100 lipercent liowned lisubsidiary
B) A licorporation lipurchases li90 lipercent liof lithe livoting listock liof lianother licompany
C) A licorporation lihas liboth licontrol liand li majority liownership liof lian liunincorporated licompany
D) A licorporation liowns liless-than lia licontrolling liinterest liin lian liunincorporated licompany
Answer: li D
liDifficulty: li1
liEasy
Topic: Organizational liStructure liand liFinancial liReporting
Learning liObjective: 01-01 liUnderstand liand liexplain lithe lireasons lifor liand lidifferent
li methods liofilbusiness liexpansion, lithe litypes liof liorganizational listructures, liand lithe litypes
liof liacquisitions.
Bloom's: Remember
liAACSB: Reflective
liThinkingilAICPA: FN
liDecision liMaking
During liits liinception, liDevon liCompany lipurchased liland lifor li$100,000 liand lia libuilding lifor
li$180,000. liAfter liexactly li3 liyears, liit litransferred lithese liassets liand licash liof li$50,000 lito lia
linewly licreated lisubsidiary,ilRegan liCompany, liin liexchange lifor li15,000 lishares liof liRegan's li$10
lipar livalue listock. liDevon liuses listraight-line lidepreciation. liUseful lilife lifor lithe libuilding liis
li30 liyears, liwith lizero liresidual livalue. liAn liappraisal lirevealed lithat lithe libuilding li has lia lifair
li value liof li$200,000.
5) Based lion lithe liinformation liprovided, liat lithe litime liof lithe litransfer, liRegan liCompany lishould
li record:
A) Building liat li$180,000 liand lino liaccumulated lidepreciation.
B) Building liat li$162,000 liand lino liaccumulated lidepreciation.
C) Building liat li$200,000 liand liaccumulated lidepreciation liof li$24,000.
D) Building liat li$180,000 liand liaccumulated lidepreciation liof li$18,000.
Answer: l i D
liDifficulty: li2
liMedium
Topic: Valuation liof liBusiness liEntities; liAccounting lifor liInternal liExpansion: liCreating
liBusinessilEntities
Learning liObjective: 01-04 liUnderstand liand liexplain lithe lidifferences libetween lidifferent
liforms liof libusiness licombinations.; li01-03 liMake licalculations liand liprepare lijournal lientries
, lifor lithe licreation liof liaib
l usiness lientity.
Bloom's: Understand
liAACSB: Analytical
liThinkingilAICPA: FN
liMeasurement
