Test Bank for Advanced Financial Accounting 13th
oi oi oi oi oi oio i
Edition
oi o i
By Theodore Christensen
o i o i
,TEST BANK FOR oi oi
Advanced Financial Accounting 13th Edition By Theodore Christensen oi oi oi oi oi oi oi
Chapter 1 Intercorporate Acquisitions and Investments in Other Entities
oi o i o i oi o i oi oi
1) Assuming no impairment in value prior to transfer, assets transferred by a parent company to
oi oi oi oi oi oi oi oi oi oi oi oi oi oi oi
another entity it has created should be recorded by the newly created entity at the assets':
oi oi oi oi oi oi oi oi oi oi oi oi oi oi oi
A) cost to the parent company. oi oi oi oi
B) book value on the parent company's books at the date of transfer.
oi oi oi oi oi oi oi oi oi oi oi
C) fair value at the date of transfer.
oi oi oi oi oi oi
D) fair value of consideration exchanged by the newly created entity.
oi oi oi oi oi oi oi oi oi
Answer: B Diffic oi oi
ulty: 1 Easy oi oi
Topic: Internal Expansion: Creating a Business Entity; Valuation of Business Entities Learni
o i oi oi oi oi oi oi oi oi oi oi
ng Objective:
oi 01-
01 Understand and explain the reasons for and different methods of business expansion, the ty
oi oi oi oi oi oi oi oi oi oi oi oi oi oi
pes of organizational structures, and the types of acquisitions.; 01 -
oi oi oi oi oi oi oi oi oi oi
03 Make calculations and prepare journal entries for the creation of a business entity.
oi oi oi oi oi oi oi oi oi oi oi oi oi
Bloom's:
Remember AACSB: oi
o Reflective Thinking AICPA:
i oi oi
FN Decision Making oi oi
2) Given the increased development of complex business structures, which of the following
oi oi oi oi oi oi oi oi oi oi oi oi
regulators is responsible for the continued usefulness of accounting reports?
oi oi oi oi oi oi oi oi oi
A) Securities and Exchange Commission (SEC) oi o i oi oi
B) Public Company Accounting Oversight Board (PCAOB)
oi o i oi oi oi
C) Financial Accounting Standards Board (FASB) oi oi oi oi
D) All of the other answers are correct
oi oi oi oi oi oi
Answer: D Diffic oi oi
ulty: 1 Easy oi oi
Topic: An Introduction to Complex Business Structures oi oi oi oi oi
Learning Objective: 01- oi
01 Understand and explain the reasons for and different methods of business expansion, the t
oi oi oi oi oi oi oi oi oi oi oi oi oi oi
ypes of organizational structures, and the types of acquisitions.
oi oi oi oi oi oi oi oi
Bloom's:
Remember AACSB: oi
Reflective Thinking AICPA:
o i oi oi
FN Reporting oi
3) A business combination in which the acquired company's assets and liabilities are combined
oi oi oi oi oi oi oi oi oi oi oi oi oi
with those of the acquiring company into a single entity is defined as:
oi oi oi oi oi oi oi oi oi oi oi oi
A) Stock acquisition oi
B) Leveraged buyout o i
C) Statutory Merger oi
,D) Reverse statutory rollup
oi oi
, Answer: C Diffic oi oi
ulty: 1 Easy oi oi
Topic: Organizational Structure and Financial Reporting oi oi oi oi
Learning Objective: 01- oi
04 Understand and explain the differences between different forms of business combinations.
oi oi oi oi oi oi oi oi oi oi oi
Bloom's:
Remember AACSB: oi
o Reflective Thinking AICPA:
i oi oi
FN Decision Making oi oi
4) In which of the following situations do accounting standards not require that the financial
oi oi oi oi oi oi oi oi oi oi oi oi oi oi
statements of the parent and subsidiary be consolidated?
oi oi oi oi oi oi oi
A) A corporation creates a new 100 percent owned subsidiary
oi oi oi oi oi oi oi oi
B) A corporation purchases 90 percent of the voting stock of another company
oi oi oi oi oi oi oi oi oi oi oi
C) A corporation has both control and majority ownership of an unincorporated company
oi oi oi oi oi o i oi oi oi oi oi
D) A corporation owns less-than a controlling interest in an unincorporated company
oi oi oi oi o i oi o i oi oi oi
Answer: D Diffic oi oi
ulty: 1 Easy oi oi
Topic: Organizational Structure and Financial Reporting oi oi oi oi
Learning Objective: 01- oi
01 Understand and explain the reasons for and different methods of business expansion, the t
oi oi oi oi oi oi oi oi oi oi oi oi oi oi
ypes of organizational structures, and the types of acquisitions.
oi oi oi oi oi oi oi oi
Bloom's:
Remember AACSB: oi
o Reflective Thinking AICPA:
i oi oi
FN Decision Making oi oi
During its inception, Devon Company purchased land for $100,000 and a building for $180,000.
oi oi oi oi oi oi oi oi oi oi oi oi oi o
After exactly 3 years, it transferred these assets and cash of $50,000 to a newly created subsidiary,
i oi oi oi oi oi oi oi oi oi oi oi oi oi oi oi oi oi
Regan Company, in exchange for 15,000 shares of Regan's $10 par value stock. Devon uses str
oi oi oi oi oi oi oi oi oi oi oi oi oi oi oi
aight-
line depreciation. Useful life for the building is 30 years, with zero residual value. An appraisal
oi oi oi oi oi oi oi oi oi oi oi oi oi oi oi oi
revealed that the building has a fair value of $200,000.
oi oi oi oi oi oi oi oi oi
5) Based on the information provided, at the time of the transfer, Regan Company should record:
oi oi oi oi oi oi oi oi oi oi oi oi oi oi
A) Building at $180,000 and no accumulated depreciation. oi o i oi oi oi oi
B) Building at $162,000 and no accumulated depreciation. oi oi oi oi oi oi
C) Building at $200,000 and accumulated depreciation of $24,000.
oi o i oi oi o i oi oi
D) Building at $180,000 and accumulated depreciation of $18,000.
oi o i oi oi oi oi oi
Answer: D Difficult oi oi
y: 2 Medium
oi oi
Topic:
Valuation of Business Entities; Accounting for Internal Expansion: Creating Business oi oi oi oi oi oi oi oi oi oi
Entities
Learning Objective: 01- oi
04 Understand and explain the differences between different forms of business combinations.;
oi oi oi oi oi oi oi oi oi oi oi oi
01-03 Make calculations and prepare journal entries for the creation of a business entity.
oi oi oi oi oi oi oi oi oi oi oi oi oi
Bloom's:
Understand AACSB oi
oi oi oi oi oi oio i
Edition
oi o i
By Theodore Christensen
o i o i
,TEST BANK FOR oi oi
Advanced Financial Accounting 13th Edition By Theodore Christensen oi oi oi oi oi oi oi
Chapter 1 Intercorporate Acquisitions and Investments in Other Entities
oi o i o i oi o i oi oi
1) Assuming no impairment in value prior to transfer, assets transferred by a parent company to
oi oi oi oi oi oi oi oi oi oi oi oi oi oi oi
another entity it has created should be recorded by the newly created entity at the assets':
oi oi oi oi oi oi oi oi oi oi oi oi oi oi oi
A) cost to the parent company. oi oi oi oi
B) book value on the parent company's books at the date of transfer.
oi oi oi oi oi oi oi oi oi oi oi
C) fair value at the date of transfer.
oi oi oi oi oi oi
D) fair value of consideration exchanged by the newly created entity.
oi oi oi oi oi oi oi oi oi
Answer: B Diffic oi oi
ulty: 1 Easy oi oi
Topic: Internal Expansion: Creating a Business Entity; Valuation of Business Entities Learni
o i oi oi oi oi oi oi oi oi oi oi
ng Objective:
oi 01-
01 Understand and explain the reasons for and different methods of business expansion, the ty
oi oi oi oi oi oi oi oi oi oi oi oi oi oi
pes of organizational structures, and the types of acquisitions.; 01 -
oi oi oi oi oi oi oi oi oi oi
03 Make calculations and prepare journal entries for the creation of a business entity.
oi oi oi oi oi oi oi oi oi oi oi oi oi
Bloom's:
Remember AACSB: oi
o Reflective Thinking AICPA:
i oi oi
FN Decision Making oi oi
2) Given the increased development of complex business structures, which of the following
oi oi oi oi oi oi oi oi oi oi oi oi
regulators is responsible for the continued usefulness of accounting reports?
oi oi oi oi oi oi oi oi oi
A) Securities and Exchange Commission (SEC) oi o i oi oi
B) Public Company Accounting Oversight Board (PCAOB)
oi o i oi oi oi
C) Financial Accounting Standards Board (FASB) oi oi oi oi
D) All of the other answers are correct
oi oi oi oi oi oi
Answer: D Diffic oi oi
ulty: 1 Easy oi oi
Topic: An Introduction to Complex Business Structures oi oi oi oi oi
Learning Objective: 01- oi
01 Understand and explain the reasons for and different methods of business expansion, the t
oi oi oi oi oi oi oi oi oi oi oi oi oi oi
ypes of organizational structures, and the types of acquisitions.
oi oi oi oi oi oi oi oi
Bloom's:
Remember AACSB: oi
Reflective Thinking AICPA:
o i oi oi
FN Reporting oi
3) A business combination in which the acquired company's assets and liabilities are combined
oi oi oi oi oi oi oi oi oi oi oi oi oi
with those of the acquiring company into a single entity is defined as:
oi oi oi oi oi oi oi oi oi oi oi oi
A) Stock acquisition oi
B) Leveraged buyout o i
C) Statutory Merger oi
,D) Reverse statutory rollup
oi oi
, Answer: C Diffic oi oi
ulty: 1 Easy oi oi
Topic: Organizational Structure and Financial Reporting oi oi oi oi
Learning Objective: 01- oi
04 Understand and explain the differences between different forms of business combinations.
oi oi oi oi oi oi oi oi oi oi oi
Bloom's:
Remember AACSB: oi
o Reflective Thinking AICPA:
i oi oi
FN Decision Making oi oi
4) In which of the following situations do accounting standards not require that the financial
oi oi oi oi oi oi oi oi oi oi oi oi oi oi
statements of the parent and subsidiary be consolidated?
oi oi oi oi oi oi oi
A) A corporation creates a new 100 percent owned subsidiary
oi oi oi oi oi oi oi oi
B) A corporation purchases 90 percent of the voting stock of another company
oi oi oi oi oi oi oi oi oi oi oi
C) A corporation has both control and majority ownership of an unincorporated company
oi oi oi oi oi o i oi oi oi oi oi
D) A corporation owns less-than a controlling interest in an unincorporated company
oi oi oi oi o i oi o i oi oi oi
Answer: D Diffic oi oi
ulty: 1 Easy oi oi
Topic: Organizational Structure and Financial Reporting oi oi oi oi
Learning Objective: 01- oi
01 Understand and explain the reasons for and different methods of business expansion, the t
oi oi oi oi oi oi oi oi oi oi oi oi oi oi
ypes of organizational structures, and the types of acquisitions.
oi oi oi oi oi oi oi oi
Bloom's:
Remember AACSB: oi
o Reflective Thinking AICPA:
i oi oi
FN Decision Making oi oi
During its inception, Devon Company purchased land for $100,000 and a building for $180,000.
oi oi oi oi oi oi oi oi oi oi oi oi oi o
After exactly 3 years, it transferred these assets and cash of $50,000 to a newly created subsidiary,
i oi oi oi oi oi oi oi oi oi oi oi oi oi oi oi oi oi
Regan Company, in exchange for 15,000 shares of Regan's $10 par value stock. Devon uses str
oi oi oi oi oi oi oi oi oi oi oi oi oi oi oi
aight-
line depreciation. Useful life for the building is 30 years, with zero residual value. An appraisal
oi oi oi oi oi oi oi oi oi oi oi oi oi oi oi oi
revealed that the building has a fair value of $200,000.
oi oi oi oi oi oi oi oi oi
5) Based on the information provided, at the time of the transfer, Regan Company should record:
oi oi oi oi oi oi oi oi oi oi oi oi oi oi
A) Building at $180,000 and no accumulated depreciation. oi o i oi oi oi oi
B) Building at $162,000 and no accumulated depreciation. oi oi oi oi oi oi
C) Building at $200,000 and accumulated depreciation of $24,000.
oi o i oi oi o i oi oi
D) Building at $180,000 and accumulated depreciation of $18,000.
oi o i oi oi oi oi oi
Answer: D Difficult oi oi
y: 2 Medium
oi oi
Topic:
Valuation of Business Entities; Accounting for Internal Expansion: Creating Business oi oi oi oi oi oi oi oi oi oi
Entities
Learning Objective: 01- oi
04 Understand and explain the differences between different forms of business combinations.;
oi oi oi oi oi oi oi oi oi oi oi oi
01-03 Make calculations and prepare journal entries for the creation of a business entity.
oi oi oi oi oi oi oi oi oi oi oi oi oi
Bloom's:
Understand AACSB oi
