TEST BANK
Advanced Financial Accounting13th
Edition
By Theodore Christensen ALL CHAPTERS 1 TO 20
COVERED
,TABLE OF CONTENT
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PREFACE1. Intercorporate Acquisitions and Investments in Other Entities
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2. Reporting Intercorporate Investments and Consolidation of Wholly Owned Subsidiaries with No Differential
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3. The Reporting Entity and the Consolidation of Less-Than-Wholly-Owned Subsidiaries with NoDifferential
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4. Consolidation of Wholly Owned Subsidiaries Acquired at More Than Book Value
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5. Consolidation of Less-Than-Wholly-Owned Subsidiaries Acquired at More Than Book Value
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6. Intercompany Inventory Transactions
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7. Intercompany Transfers of Services and Noncurrent Assets
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8. Intercompany Indebtedness
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9. Consolidation Ownership Issues
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10. Additional Consolidation Reporting Issues
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11. Multinational Accounting: Foreign Currency Transactions and Financial Instruments
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12. Multinational Accounting: Issues in Financial Reporting and Translation of Foreign Entity Statements
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13. Segment and Interim Reporting
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14. SEC Reporting
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15. Partnerships: Formation, Operation, and Changes in Membership
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16. Partnerships: Liquidation
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17. Governmental Entities: Introduction and General Fund Accounting
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18. Governmental Entities: Special Funds and Governmentwide Financial Statements
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19. Not-for-Profit Entities
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20. Corporations in Financial Difficulty
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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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toanother 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. br br br b r
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.b r br br br br br
D) fair value of consideration exchanged by the newly created entity.
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Answer: B Diffic br br
ulty: 1 Easy br br
Topic: Internal Expansion: Creating a Business Entity; Valuation of Business Entities Learnin
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g Objective:
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01 Understand and explain the reasons for and different methods of business expansion, the ty
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pes 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: br
Reflective Thinking AICPA:
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FN Decision Making br br
2) Given the increased development of complex business structures, which of the followingreg
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ulators is responsible for the continued usefulness of accounting reports?
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A) Securities and Exchange Commission (SEC) br b r b r b r
B) Public Company Accounting Oversight Board (PCAOB) b r b r br b r br
C) Financial Accounting Standards Board (FASB) b r b r b r b r
,D) All of the other answers are correct
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Answer: D Diffic br br
ulty: 1 Easybr br
Topic: An Introduction to Complex Business Structures
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Learning Objective: 01- br
01 Understand and explain the reasons for and different methods ofbusiness expansion, the typ
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es of organizational structures, and the types of acquisitions.
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Bloom's:
Remember AACSB br
: Reflective Thinking AICPA:
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FN Reporting br
3) A business combination in which the acquired company's assets and liabilities are combinedwit
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h those of the acquiring company into a single entity is defined as:
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A) Stock acquisition br
B) Leveraged buyout br
C) Statutory Merger br
D) Reverse statutory rollup b r br
, Answer: C Diffic br br
ulty: 1 Easy br br
Topic: Organizational Structure and Financial Reporting b r b r b r b r
Learning Objective: 01- br
04 Understand and explain the differences between different forms ofbusiness combinations.
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Bloom's:
Remember AACSB: br
Reflective Thinking AICPA:
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FN Decision Making br br
4) In which of the following situations do accounting standards not require that the financi
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alstatements 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 Diffic br br
ulty: 1 Easy br br
Topic: Organizational Structure and Financial Reporting b r b r b r b r
Learning Objective: 01- br
01 Understand and explain the reasons for and different methods ofbusiness expansion, the type
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s of organizational structures, and the types of acquisitions.
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Bloom's:
Remember AACSB: br
Reflective Thinking AICPA:
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FN Decision Making br br
During its inception, Devon Company purchased land for $100,000 and a building for $180,000. A
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fter exactly 3 years, it transferred these assets and cash of $50,000 to a newly created subsidiary,Rega
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n Company, in exchange for 15,000 shares of Regan's $10 par value stock. Devon uses straight-
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line depreciation. Useful life for the building is 30 years, with zero residual value. An appraisal re
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vealed 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. br b r br b r b r b r
B) Building at $162,000 and no accumulated depreciation. br b r b r b r b r b r
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 Difficulty brbr br
: 2 Medium
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Topic:
Valuation of Business Entities; Accounting for Internal Expansion: Creating Busine b r br br b r b r b r b r b r b r
ss Entitiesbr
Learning Objective: 01- br
04 Understand and explain the differences between different forms of business combinations.; 0
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1-03 Make calculations and prepare journal entries for the creation of a business entity.
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Bloom's:
Understand AACSB br
: Analytical Thinking AICPA:
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Advanced Financial Accounting13th
Edition
By Theodore Christensen ALL CHAPTERS 1 TO 20
COVERED
,TABLE OF CONTENT
brbrbrbrbr
br br
PREFACE1. Intercorporate Acquisitions and Investments in Other Entities
br br br br br br br
2. Reporting Intercorporate Investments and Consolidation of Wholly Owned Subsidiaries with No Differential
br br br br br br br br br br br br
3. The Reporting Entity and the Consolidation of Less-Than-Wholly-Owned Subsidiaries with NoDifferential
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4. Consolidation of Wholly Owned Subsidiaries Acquired at More Than Book Value
br br br br br br br br br br br
5. Consolidation of Less-Than-Wholly-Owned Subsidiaries Acquired at More Than Book Value
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6. Intercompany Inventory Transactions
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7. Intercompany Transfers of Services and Noncurrent Assets
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8. Intercompany Indebtedness
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9. Consolidation Ownership Issues
br br br
10. Additional Consolidation Reporting Issues
br br br br
11. Multinational Accounting: Foreign Currency Transactions and Financial Instruments
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12. Multinational Accounting: Issues in Financial Reporting and Translation of Foreign Entity Statements
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13. Segment and Interim Reporting
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14. SEC Reporting
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15. Partnerships: Formation, Operation, and Changes in Membership
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16. Partnerships: Liquidation
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17. Governmental Entities: Introduction and General Fund Accounting
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18. Governmental Entities: Special Funds and Governmentwide Financial Statements
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19. Not-for-Profit Entities
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20. Corporations in Financial Difficulty
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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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toanother entity it has created should be recorded by the newly created entity at the assets':
r
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A) cost to the parent company. br br br b r
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.b r br br br br br
D) fair value of consideration exchanged by the newly created entity.
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Answer: B Diffic br br
ulty: 1 Easy br br
Topic: Internal Expansion: Creating a Business Entity; Valuation of Business Entities Learnin
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g Objective:
br 01-
01 Understand and explain the reasons for and different methods of business expansion, the ty
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pes 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: br
Reflective Thinking AICPA:
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b
FN Decision Making br br
2) Given the increased development of complex business structures, which of the followingreg
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ulators is responsible for the continued usefulness of accounting reports?
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A) Securities and Exchange Commission (SEC) br b r b r b r
B) Public Company Accounting Oversight Board (PCAOB) b r b r br b r br
C) Financial Accounting Standards Board (FASB) b r b r b r b r
,D) All of the other answers are correct
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Answer: D Diffic br br
ulty: 1 Easybr br
Topic: An Introduction to Complex Business Structures
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Learning Objective: 01- br
01 Understand and explain the reasons for and different methods ofbusiness expansion, the typ
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b br b r br
es of organizational structures, and the types of acquisitions.
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Bloom's:
Remember AACSB br
: Reflective Thinking AICPA:
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b
FN Reporting br
3) A business combination in which the acquired company's assets and liabilities are combinedwit
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h those of the acquiring company into a single entity is defined as:
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A) Stock acquisition br
B) Leveraged buyout br
C) Statutory Merger br
D) Reverse statutory rollup b r br
, Answer: C Diffic br br
ulty: 1 Easy br br
Topic: Organizational Structure and Financial Reporting b r b r b r b r
Learning Objective: 01- br
04 Understand and explain the differences between different forms ofbusiness combinations.
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b br
Bloom's:
Remember AACSB: br
Reflective Thinking AICPA:
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b
FN Decision Making br br
4) In which of the following situations do accounting standards not require that the financi
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alstatements of the parent and subsidiary be consolidated?
r
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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 Diffic br br
ulty: 1 Easy br br
Topic: Organizational Structure and Financial Reporting b r b r b r b r
Learning Objective: 01- br
01 Understand and explain the reasons for and different methods ofbusiness expansion, the type
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b br b r br
s of organizational structures, and the types of acquisitions.
br br b r br br br br br
Bloom's:
Remember AACSB: br
Reflective Thinking AICPA:
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b
FN Decision Making br br
During its inception, Devon Company purchased land for $100,000 and a building for $180,000. A
br br br br br br br br br br br br br br
fter exactly 3 years, it transferred these assets and cash of $50,000 to a newly created subsidiary,Rega
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b
n Company, in exchange for 15,000 shares of Regan's $10 par value stock. Devon uses straight-
br br br br br br br br br br br br br br br
line depreciation. Useful life for the building is 30 years, with zero residual value. An appraisal re
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vealed 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. br b r br b r b r b r
B) Building at $162,000 and no accumulated depreciation. br b r b r b r b r b r
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 Difficulty brbr br
: 2 Medium
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Topic:
Valuation of Business Entities; Accounting for Internal Expansion: Creating Busine b r br br b r b r b r b r b r b r
ss Entitiesbr
Learning Objective: 01- br
04 Understand and explain the differences between different forms of business combinations.; 0
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1-03 Make calculations and prepare journal entries for the creation of a business entity.
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Bloom's:
Understand AACSB br
: Analytical Thinking AICPA:
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b
