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 $d $d
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. $d $d $d $d
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 $d $d
culty: 1 Easy $d $d
Topic: Internal Expansion: Creating a Business Entity; Valuation of Business Entities Lear
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ning Objective: $d 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: $d
$ Reflective Thinking AICPA
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:
FN Decision Makin $d $d
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) $d $ d $d $d
B) Public Company Accounting Oversight Board (PCAOB)
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C) Financial Accounting Standards Board (FASB) $ d $d $d $d
D) All of the other answers are correct
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Answer: D Diffi $d $d
culty: 1 Easy $d $d
Topic: An Introduction to Complex Business Structures
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Learning Objective: 01- $d
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 $d
: Reflective Thinking AICP
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A: FN Reporting $d
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 buyout $ d
C) Statutory Merger
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D) Reverse statutory rollup
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, Answer: C Diffi $d $d
culty: 1 Easy $d $d
Topic: Organizational Structure and Financial Reporting $d $d $d $d
Learning Objective: 01- $d
04 Understand and explain the differences between different forms of business combinations.
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Bloom's:
Remember AACSB: $d
$ Reflective Thinking AICPA
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:
FN Decision Makin $d $d
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 $d $d
culty: 1 Easy $d $d
Topic: Organizational Structure and Financial Reporting $d $d $d $d
Learning Objective: 01- $d
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: $d
$ Reflective Thinking AICPA
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:
FN Decision Makin $d $d
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 $d $d
y: 2 Medium
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Topic:
Valuation of Business Entities; Accounting for Internal Expansion: Creating Busines
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s Entities
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Learning Objective: 01- $d
$d $d $d $d $d $d$ d
h Edition
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By Theodore Christensen
$ d $ d
,TEST BANK FOR $d $d
Advanced Financial Accounting 13th Edition By Theodore Christensen
$d $d $d $d $d $d $d
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. $d $d $d $d
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 $d $d
culty: 1 Easy $d $d
Topic: Internal Expansion: Creating a Business Entity; Valuation of Business Entities Lear
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ning Objective: $d 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: $d
$ Reflective Thinking AICPA
d $d $d
:
FN Decision Makin $d $d
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) $d $ d $d $d
B) Public Company Accounting Oversight Board (PCAOB)
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C) Financial Accounting Standards Board (FASB) $ d $d $d $d
D) All of the other answers are correct
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Answer: D Diffi $d $d
culty: 1 Easy $d $d
Topic: An Introduction to Complex Business Structures
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Learning Objective: 01- $d
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 $d
: Reflective Thinking AICP
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A: FN Reporting $d
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 buyout $ d
C) Statutory Merger
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D) Reverse statutory rollup
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, Answer: C Diffi $d $d
culty: 1 Easy $d $d
Topic: Organizational Structure and Financial Reporting $d $d $d $d
Learning Objective: 01- $d
04 Understand and explain the differences between different forms of business combinations.
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Bloom's:
Remember AACSB: $d
$ Reflective Thinking AICPA
d $d $d
:
FN Decision Makin $d $d
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 $d $d
culty: 1 Easy $d $d
Topic: Organizational Structure and Financial Reporting $d $d $d $d
Learning Objective: 01- $d
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: $d
$ Reflective Thinking AICPA
d $d $d
:
FN Decision Makin $d $d
g
During its inception, Devon Company purchased land for $100,000 and a building for $180,0
$d $d $d $d $d $d $d $d $d $d $d $d $d
00. After exactly 3 years, it transferred these assets and cash of $50,000 to a newly created subsi
$d $d $d $d $d $d $d $d $d $d $d $d $d $d $d $d $d
diary, Regan Company, in exchange for 15,000 shares of Regan's $10 par value stock. Devo
$d $d $d $d $d $d $d $d $d $d $d $d $d $d
n uses straight-
$d $d
line depreciation. Useful life for the building is 30 years, with zero residual value. An apprai
$d $d $d $d $d $d $d $d $d $d $d $d $d $d $d
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 $d $d
y: 2 Medium
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Topic:
Valuation of Business Entities; Accounting for Internal Expansion: Creating Busines
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s Entities
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Learning Objective: 01- $d
