Test Bank for Advanced Financial Accounting
13th Edition
By Theodore Christensen
,TEST BANK FOR J U J U
AdvancedFinancialAccounting13th Edition ByTheodoreChristensen JU JU JU JU JU JU JU
Chapter1 U
J Intercorporate Acquisitions and Investments in Other Entities J U J U J U J U J U J U
1) Assuming no impairment in value prior to transfer, assets transferred by a parent company toan J U J U J U J U J U J U J U J U JU J U JU J U J U JU JU
other entity it has created should be recorded by the newly created entity at the assets':
J U JU J U J U J U J U J U J U JU J U JU J U JU JU J U
A) cost to the parent company. JU J U J U J U
B) book value on the parent company's books at the date of transfer. J U J U JU J U J U J U J U J U J U J U JU
C) fair value at the date of transfer. J U J U J U J U J U JU
D) fair valueof consideration exchanged bythe newlycreated entity.
JU JU JU JU JU JU JU JU JU
Answer: B Diffic J U JU
ulty:1Easy JU JU
Topic: Internal Expansion: Creating a Business Entity; Valuation of Business Entities Learning Ob
JU JU JU JU JU JU JU JU JU JU JU JU
jective: 01-
01 Understand and explain the reasons for and different methods of business expansion, the types o
JU JU JU JU JU JU JU JU JU JU JU J U J U J U J U
f organizational structures, and the types of acquisitions.; 01-
J U J U J U J U J U J U J U J U JU
03 Make calculations and prepare journal entries for the creation of a business entity.
JU J U JU J U J U JU J U JU J U J U JU J U J U
Bloom's:
Remember AACSB: JU
J ReflectiveThinkingAICPA:
U JU JU
FN Decision Making J U J U
2) Given the increased development of complex business structures, which of the followingregulat
JU JU JU JU JU JU JU JU JU JU JU JU
ors isresponsible for the continued usefulness ofaccounting reports?
JU JU JU JU JU JU JU JU JU
A) Securities and Exchange Commission (SEC) J U J U J U J U
B) Public Company Accounting Oversight Board (PCAOB) J U J U J U J U J U
C) Financial Accounting Standards Board (FASB) J U J U J U J U
D) All of the other answers are correct J U JU J U J U J U J U
Answer: D Diffic J U JU
ulty:1Easy JU JU
Topic: An Introduction to Complex Business Structures J U J U J U J U J U
Learning Objective: 01- JU
01 Understand and explain thereasons for and different methods ofbusiness expansion, the types o
JU JU JU JU JU JU JU JU JU JU JU J U J U J U J U
f organizational structures, and the types of acquisitions.
JU J U J U J U J U J U JU
Bloom's:
Remember AACSB: JU
J ReflectiveThinkingAICPA:
U JU JU
FN Reporting JU
3) A business combination in which the acquired company's assets and liabilities are combinedwithth
JU JU JU JU JU JU JU JU JU JU JU JU JU JU
ose ofthe acquiring company into a single entity is defined as:
JU JU JU J U JU JU JU JU JU JU JU
A) Stock acquisition JU
B) Leveragedbuyout JU
C) StatutoryMerger JU
,D) Reverse statutory rollup
J U J U
, Answer: C Diffic J U JU
ulty:1Easy JU JU
Topic: Organizational Structure and Financial Reporting J U J U J U J U
Learning Objective: 01- JU
04Understand and explainthe differences between different forms ofbusiness combinations.
JU JU JU JU JU JU JU JU JU JU JU
Bloom's:
Remember AACSB: JU
JReflectiveThinkingAICPA:
U JU JU
FN Decision Making J U J U
4) In which of the following situations do accounting standards not require that the financialst
J U J U JU J U J U J U J U J U J U J U J U J U J U JU
atements ofthe parent and subsidiary be consolidated? JU JU JU J U JU JU JU
A) Acorporationcreatesa new100 percent owned subsidiary
JU JU JU JU JU JU JU JU
B) A corporation purchases 90 percent of the voting stock of another company
J U J U J U J U J U JU J U J U J U JU J U
C) A corporation has both control and majority ownership of an unincorporated company
J U J U J U J U J U J U J U J U JU J U J U
D) A corporation owns less-than a controlling interest in an unincorporated company
J U J U J U J U J U J U J U J U J U J U
Answer: D Diffic J U JU
ulty:1Easy JU JU
Topic: Organizational Structure and Financial Reporting J U J U J U J U
Learning Objective: 01- JU
01 Understand and explain the reasons for and different methods ofbusiness expansion, the types of
JU JU JU JU JU JU JU JU JU JU JU J U J U J U J U JU
organizational structures, and the types of acquisitions. J U J U J U J U J U JU
Bloom's:
Remember AACSB: JU
JReflectiveThinkingAICPA:
U JU JU
FN Decision Making J U J U
During its inception, Devon Company purchased land for $100,000 anda building for $180,000. After e
JU JU JU JU JU JU JU JU JU JU JU JU JU JU JU
xactly 3 years, it transferred these assets and cash of $50,000 to a newly created subsidiary,Regan Compa
JU JU JU JU JU JU JU JU JU JU JU JU JU JU JU JU JU
ny, in exchange for 15,000 shares of Regan's $10 par value stock. Devon uses straight-
JU JU JU JU JU JU JU JU JU JU JU JU JU JU
line depreciation. Useful life for the building is 30 years, with zero residual value. An appraisal reveal
JU JU JU JU JU JU JU JU JU JU JU JU JU JU JU JU
ed that the building has a fair value of$200,000.
JU JU JU JU JU J U J U JU JU
5) Based on the information provided, at the time of the transfer, Regan Company should record:
J U JU J U J U J U J U J U J U J U J U J U J U J U J U
A) Building at $180,000 and no accumulated depreciation. J U J U J U J U J U J U
B) Building at $162,000 and no accumulated depreciation. J U J U J U J U J U J U
C) Building at $200,000 and accumulated depreciation of $24,000. J U J U J U J U J U J U J U
D) Building at $180,000 and accumulated depreciation of $18,000. J U J U J U J U J U J U J U
Answer: D Difficulty: J UJU JU J
U2 Medium J U
Topic:
Valuation of Business Entities; Accounting for Internal Expansion: Creating Business J U J U J U J U J U J U J U J U J U JU
Entities
Learning Objective: 01- JU
04 Understand and explain the differences between different forms of business combinations.; 01-
JU JU JU JU JU JU JU JU JU JU J U J U
03 Make calculations and prepare journal entries for the creation of a business entity.
J U J U J U J U J U J U J U J U J U J U JU JU JU
Bloom's:
Understand AACSB JU
: AnalyticalThinkingAICPA:
J U JU JU
13th Edition
By Theodore Christensen
,TEST BANK FOR J U J U
AdvancedFinancialAccounting13th Edition ByTheodoreChristensen JU JU JU JU JU JU JU
Chapter1 U
J Intercorporate Acquisitions and Investments in Other Entities J U J U J U J U J U J U
1) Assuming no impairment in value prior to transfer, assets transferred by a parent company toan J U J U J U J U J U J U J U J U JU J U JU J U J U JU JU
other entity it has created should be recorded by the newly created entity at the assets':
J U JU J U J U J U J U J U J U JU J U JU J U JU JU J U
A) cost to the parent company. JU J U J U J U
B) book value on the parent company's books at the date of transfer. J U J U JU J U J U J U J U J U J U J U JU
C) fair value at the date of transfer. J U J U J U J U J U JU
D) fair valueof consideration exchanged bythe newlycreated entity.
JU JU JU JU JU JU JU JU JU
Answer: B Diffic J U JU
ulty:1Easy JU JU
Topic: Internal Expansion: Creating a Business Entity; Valuation of Business Entities Learning Ob
JU JU JU JU JU JU JU JU JU JU JU JU
jective: 01-
01 Understand and explain the reasons for and different methods of business expansion, the types o
JU JU JU JU JU JU JU JU JU JU JU J U J U J U J U
f organizational structures, and the types of acquisitions.; 01-
J U J U J U J U J U J U J U J U JU
03 Make calculations and prepare journal entries for the creation of a business entity.
JU J U JU J U J U JU J U JU J U J U JU J U J U
Bloom's:
Remember AACSB: JU
J ReflectiveThinkingAICPA:
U JU JU
FN Decision Making J U J U
2) Given the increased development of complex business structures, which of the followingregulat
JU JU JU JU JU JU JU JU JU JU JU JU
ors isresponsible for the continued usefulness ofaccounting reports?
JU JU JU JU JU JU JU JU JU
A) Securities and Exchange Commission (SEC) J U J U J U J U
B) Public Company Accounting Oversight Board (PCAOB) J U J U J U J U J U
C) Financial Accounting Standards Board (FASB) J U J U J U J U
D) All of the other answers are correct J U JU J U J U J U J U
Answer: D Diffic J U JU
ulty:1Easy JU JU
Topic: An Introduction to Complex Business Structures J U J U J U J U J U
Learning Objective: 01- JU
01 Understand and explain thereasons for and different methods ofbusiness expansion, the types o
JU JU JU JU JU JU JU JU JU JU JU J U J U J U J U
f organizational structures, and the types of acquisitions.
JU J U J U J U J U J U JU
Bloom's:
Remember AACSB: JU
J ReflectiveThinkingAICPA:
U JU JU
FN Reporting JU
3) A business combination in which the acquired company's assets and liabilities are combinedwithth
JU JU JU JU JU JU JU JU JU JU JU JU JU JU
ose ofthe acquiring company into a single entity is defined as:
JU JU JU J U JU JU JU JU JU JU JU
A) Stock acquisition JU
B) Leveragedbuyout JU
C) StatutoryMerger JU
,D) Reverse statutory rollup
J U J U
, Answer: C Diffic J U JU
ulty:1Easy JU JU
Topic: Organizational Structure and Financial Reporting J U J U J U J U
Learning Objective: 01- JU
04Understand and explainthe differences between different forms ofbusiness combinations.
JU JU JU JU JU JU JU JU JU JU JU
Bloom's:
Remember AACSB: JU
JReflectiveThinkingAICPA:
U JU JU
FN Decision Making J U J U
4) In which of the following situations do accounting standards not require that the financialst
J U J U JU J U J U J U J U J U J U J U J U J U J U JU
atements ofthe parent and subsidiary be consolidated? JU JU JU J U JU JU JU
A) Acorporationcreatesa new100 percent owned subsidiary
JU JU JU JU JU JU JU JU
B) A corporation purchases 90 percent of the voting stock of another company
J U J U J U J U J U JU J U J U J U JU J U
C) A corporation has both control and majority ownership of an unincorporated company
J U J U J U J U J U J U J U J U JU J U J U
D) A corporation owns less-than a controlling interest in an unincorporated company
J U J U J U J U J U J U J U J U J U J U
Answer: D Diffic J U JU
ulty:1Easy JU JU
Topic: Organizational Structure and Financial Reporting J U J U J U J U
Learning Objective: 01- JU
01 Understand and explain the reasons for and different methods ofbusiness expansion, the types of
JU JU JU JU JU JU JU JU JU JU JU J U J U J U J U JU
organizational structures, and the types of acquisitions. J U J U J U J U J U JU
Bloom's:
Remember AACSB: JU
JReflectiveThinkingAICPA:
U JU JU
FN Decision Making J U J U
During its inception, Devon Company purchased land for $100,000 anda building for $180,000. After e
JU JU JU JU JU JU JU JU JU JU JU JU JU JU JU
xactly 3 years, it transferred these assets and cash of $50,000 to a newly created subsidiary,Regan Compa
JU JU JU JU JU JU JU JU JU JU JU JU JU JU JU JU JU
ny, in exchange for 15,000 shares of Regan's $10 par value stock. Devon uses straight-
JU JU JU JU JU JU JU JU JU JU JU JU JU JU
line depreciation. Useful life for the building is 30 years, with zero residual value. An appraisal reveal
JU JU JU JU JU JU JU JU JU JU JU JU JU JU JU JU
ed that the building has a fair value of$200,000.
JU JU JU JU JU J U J U JU JU
5) Based on the information provided, at the time of the transfer, Regan Company should record:
J U JU J U J U J U J U J U J U J U J U J U J U J U J U
A) Building at $180,000 and no accumulated depreciation. J U J U J U J U J U J U
B) Building at $162,000 and no accumulated depreciation. J U J U J U J U J U J U
C) Building at $200,000 and accumulated depreciation of $24,000. J U J U J U J U J U J U J U
D) Building at $180,000 and accumulated depreciation of $18,000. J U J U J U J U J U J U J U
Answer: D Difficulty: J UJU JU J
U2 Medium J U
Topic:
Valuation of Business Entities; Accounting for Internal Expansion: Creating Business J U J U J U J U J U J U J U J U J U JU
Entities
Learning Objective: 01- JU
04 Understand and explain the differences between different forms of business combinations.; 01-
JU JU JU JU JU JU JU JU JU JU J U J U
03 Make calculations and prepare journal entries for the creation of a business entity.
J U J U J U J U J U J U J U J U J U J U JU JU JU
Bloom's:
Understand AACSB JU
: AnalyticalThinkingAICPA:
J U JU JU
