Test Bank for Advanced Financial Accounting 13t
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h Edition
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By Theodore Christensen
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,TEST BANK FOR u1 u1
Advanced Financial Accounting 13th Edition By Theodore Christensen
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Chapter 1 Intercorporate Acquisitions and Investments in Other Entities
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1) Assuming no impairment in value prior to transfer, assets transferred by a parent company
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to another entity it has created should be recorded by the newly created entity at the assets'
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:
A) cost to the parent company. u1 u1 u1 u1
B) book value on the parent company's books at the date of transfer.
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C) fair value at the date of transfer.
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D) fair value of consideration exchanged by the newly created entity.
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Answer: B Diffi u1 u1
culty: 1 Easy u1 u1
Topic: Internal Expansion: Creating a Business Entity; Valuation of Business Entities Lear
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ning Objective: u1 01-
01 Understand and explain the reasons for and different methods of business expansion, the
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types of organizational structures, and the types of acquisitions.; 01 -
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03 Make calculations and prepare journal entries for the creation of a business entity.
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Bloom's:
Remember AACSB: u1
u Reflective Thinking AICPA
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:
FN Decision Makin u1 u1
g
2) Given the increased development of complex business structures, which of the followin
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g regulators is responsible for the continued usefulness of accounting reports?
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A) Securities and Exchange Commission (SEC) u1 u 1 u1 u1
B) Public Company Accounting Oversight Board (PCAOB)
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C) Financial Accounting Standards Board (FASB) u1 u1 u1 u1
D) All of the other answers are correct
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Answer: D Diffi u1 u1
culty: 1 Easy u1 u1
Topic: An Introduction to Complex Business Structures
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Learning Objective: 01- u1
01 Understand and explain the reasons for and different methods of business expansion, th
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e types of organizational structures, and the types of acquisitions.
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Bloom's:
Remember AACSB u1
: Reflective Thinking AICP
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A: FN Reporting u1
3) A business combination in which the acquired company's assets and liabilities are combine
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d with those of the acquiring company into a single entity is defined as:
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,A) Stock acquisition
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B) Leveraged buyoutu 1
C) Statutory Merger
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D) Reverse statutory rollup
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, Answer: C Diffi u1 u1
culty: 1 Easy u1 u1
Topic: Organizational Structure and Financial Reporting u1 u1 u1 u1
Learning Objective: 01- u1
04 Understand and explain the differences between different forms of business combinations.
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Bloom's:
Remember AACSB: u1
u Reflective Thinking AICPA
1 u1 u1
:
FN Decision Makin u1 u1
g
4) In which of the following situations do accounting standards not require that the financi
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al statements of the parent and subsidiary be consolidated?
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A) A corporation creates a new 100 percent owned subsidiary
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B) A corporation purchases 90 percent of the voting stock of another company
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C) A corporation has both control and majority ownership of an unincorporated company
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D) A corporation owns less-than a controlling interest in an unincorporated company
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Answer: D Diffi u1 u1
culty: 1 Easy u1 u1
Topic: Organizational Structure and Financial Reporting u1 u1 u1 u1
Learning Objective: 01- u1
01 Understand and explain the reasons for and different methods of business expansion, th
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e types of organizational structures, and the types of acquisitions.
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Bloom's:
Remember AACSB: u1
u Reflective Thinking AICPA
1 u1 u1
:
FN Decision Makin u1 u1
g
During its inception, Devon Company purchased land for $100,000 and a building for $180,0
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00. After exactly 3 years, it transferred these assets and cash of $50,000 to a newly created subsi
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diary, Regan Company, in exchange for 15,000 shares of Regan's $10 par value stock. Devo
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n uses straight-
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line depreciation. Useful life for the building is 30 years, with zero residual value. An apprai
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sal revealed that the building has a fair value of $200,000.
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5) Based on the information provided, at the time of the transfer, Regan Company should record:
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A) Building at $180,000 and no accumulated depreciation.
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B) Building at $162,000 and no accumulated depreciation.
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C) Building at $200,000 and accumulated depreciation of $24,000.
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D) Building at $180,000 and accumulated depreciation of $18,000.
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Answer: D Difficult u1 u1
y: 2 Medium
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Topic:
Valuation of Business Entities; Accounting for Internal Expansion: Creating Busines
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s Entities
u1
Learning Objective: 01- u1
u1 u1 u1 u1 u1 u1u 1
h Edition
u1 u 1
By Theodore Christensen
u 1 u 1
,TEST BANK FOR u1 u1
Advanced Financial Accounting 13th Edition By Theodore Christensen
u1 u1 u1 u1 u1 u1 u1
Chapter 1 Intercorporate Acquisitions and Investments in Other Entities
u1 u 1 u 1 u1 u 1 u1 u1
1) Assuming no impairment in value prior to transfer, assets transferred by a parent company
u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1
to another entity it has created should be recorded by the newly created entity at the assets'
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:
A) cost to the parent company. u1 u1 u1 u1
B) book value on the parent company's books at the date of transfer.
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C) fair value at the date of transfer.
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D) fair value of consideration exchanged by the newly created entity.
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Answer: B Diffi u1 u1
culty: 1 Easy u1 u1
Topic: Internal Expansion: Creating a Business Entity; Valuation of Business Entities Lear
u 1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1
ning Objective: u1 01-
01 Understand and explain the reasons for and different methods of business expansion, the
u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1
types of organizational structures, and the types of acquisitions.; 01 -
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03 Make calculations and prepare journal entries for the creation of a business entity.
u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1
Bloom's:
Remember AACSB: u1
u Reflective Thinking AICPA
1 u1 u1
:
FN Decision Makin u1 u1
g
2) Given the increased development of complex business structures, which of the followin
u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1
g regulators is responsible for the continued usefulness of accounting reports?
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A) Securities and Exchange Commission (SEC) u1 u 1 u1 u1
B) Public Company Accounting Oversight Board (PCAOB)
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C) Financial Accounting Standards Board (FASB) u1 u1 u1 u1
D) All of the other answers are correct
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Answer: D Diffi u1 u1
culty: 1 Easy u1 u1
Topic: An Introduction to Complex Business Structures
u1 u1 u1 u1 u 1
Learning Objective: 01- u1
01 Understand and explain the reasons for and different methods of business expansion, th
u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1
e types of organizational structures, and the types of acquisitions.
u1 u1 u1 u1 u1 u1 u1 u1 u1
Bloom's:
Remember AACSB u1
: Reflective Thinking AICP
u 1 u1 u1
A: FN Reporting u1
3) A business combination in which the acquired company's assets and liabilities are combine
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d with those of the acquiring company into a single entity is defined as:
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,A) Stock acquisition
u1
B) Leveraged buyoutu 1
C) Statutory Merger
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D) Reverse statutory rollup
u1 u1
, Answer: C Diffi u1 u1
culty: 1 Easy u1 u1
Topic: Organizational Structure and Financial Reporting u1 u1 u1 u1
Learning Objective: 01- u1
04 Understand and explain the differences between different forms of business combinations.
u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1
Bloom's:
Remember AACSB: u1
u Reflective Thinking AICPA
1 u1 u1
:
FN Decision Makin u1 u1
g
4) In which of the following situations do accounting standards not require that the financi
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al statements of the parent and subsidiary be consolidated?
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A) A corporation creates a new 100 percent owned subsidiary
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B) A corporation purchases 90 percent of the voting stock of another company
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C) A corporation has both control and majority ownership of an unincorporated company
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D) A corporation owns less-than a controlling interest in an unincorporated company
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Answer: D Diffi u1 u1
culty: 1 Easy u1 u1
Topic: Organizational Structure and Financial Reporting u1 u1 u1 u1
Learning Objective: 01- u1
01 Understand and explain the reasons for and different methods of business expansion, th
u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1
e types of organizational structures, and the types of acquisitions.
u1 u1 u1 u1 u1 u1 u1 u1 u1
Bloom's:
Remember AACSB: u1
u Reflective Thinking AICPA
1 u1 u1
:
FN Decision Makin u1 u1
g
During its inception, Devon Company purchased land for $100,000 and a building for $180,0
u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1
00. After exactly 3 years, it transferred these assets and cash of $50,000 to a newly created subsi
u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1
diary, Regan Company, in exchange for 15,000 shares of Regan's $10 par value stock. Devo
u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1
n uses straight-
u1 u1
line depreciation. Useful life for the building is 30 years, with zero residual value. An apprai
u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1 u1
sal revealed that the building has a fair value of $200,000.
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5) Based on the information provided, at the time of the transfer, Regan Company should record:
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A) Building at $180,000 and no accumulated depreciation.
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B) Building at $162,000 and no accumulated depreciation.
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C) Building at $200,000 and accumulated depreciation of $24,000.
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D) Building at $180,000 and accumulated depreciation of $18,000.
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Answer: D Difficult u1 u1
y: 2 Medium
u1 u1
Topic:
Valuation of Business Entities; Accounting for Internal Expansion: Creating Busines
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s Entities
u1
Learning Objective: 01- u1
