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