Test Bank for Advanced Accounting, 13th Edition (Beams, Anthony, Bettinghaus & Smith, 2021) | All Chapters 1–23 Covered

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, TABLE OF CONTENTS
Test Bank: Advanced Accounting, 13th Edition
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Authors: Floyd A. Beams, Joseph H. Anthony, Bruce Bettinghaus, Kenneth Smith
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Chapter 1. Business Combinations
Chapter 2. Stock Investments–Investor Accounting and Reporting
Chapter 3. An Introduction to Consolidated Financial Statements
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Chapter 4. Consolidation Techniques and Procedures
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Chapter 5. Intercompany Profit Transactions–Inventories
Chapter 6. Intercompany Profit Transactions–Plant Assets
Chapter 7. Intercompany Profit Transactions–Bonds
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Chapter 8. Consolidations–Changes in Ownership Interests
Chapter 9. Indirect and Mutual Holdings
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Chapter 10. Subsidiary Preferred Stock, Consolidated Earnings per Share, and Consolidated
Income Taxation
Chapter 11. Consolidation Theories, Push-Down Accounting, and Corporate Joint Ventures
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Chapter 12. Derivatives and Foreign Currency: Concepts and Common Transactions
Chapter 13. Accounting for Derivatives and Hedging Activities
Chapter 14. Foreign Currency Financial Statements
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Chapter 15. Segment and Interim Financial Reporting
Chapter 16. Partnerships–Formation, Operations, and Changes in Ownership Interests
Chapter 17. Partnership Liquidation
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Chapter 18. Corporate Liquidations and Reorganizations
Chapter 19. An Introduction to Accounting for State and Local Governmental Units
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Chapter 20. Accounting for State and Local Governmental Units–Governmental Funds
Chapter 21. Accounting for State and Local Governmental Units–Proprietary and Fiduciary
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Funds
Chapter 22. Accounting for Not-for-Profit Organizations
Chapter 23. Estates and Trusts
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, Advanced Accounting, 13e (Beams et al.)
Chapter 1 Business Combinations
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1.1 Multiple Choice Questions

1) Which of the following is NOT a reason for a company to expand through a combination, rather than
by building new facilities?
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A) A combination might provide cost advantages.
B) A combination might provide fewer operating delays.
C) A combination might provide easier access to intangible assets.
D) A combination might provide an opportunity to invest in a company without having to take
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responsibility for its financial results.
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Answer: D
Objective: LO1.1 Understand the economic motivations underlying business combinations.
Difficulty: Easy
AACSB: Analytical thinking
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2) A business merger differs from a business consolidation because
A) a merger dissolves all but one of the prior entities, but a consolidation dissolves all of the prior entities
and forms a new corporation.
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B) a consolidation dissolves all but one of the prior entities, but a merger dissolves all of the prior entities.
C) a merger is created when two entities join, but a consolidation is created when more than two entities
join.
D) a consolidation is created when two entities join, but a merger is created when more than two entities
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join.
Answer: A
Objective: LO1.2 Learn about alternative forms of business combinations, from both the legal and accounting
perspectives.
Difficulty: Easy
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AACSB: Analytical thinking

3) Following the accounting concept of a business combination, a business combination occurs when a
company acquires an equity interest in another entity and has
A) at least 20% ownership in the entity.
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B) more than 50% ownership in the entity.
C) 100% ownership in the entity.
D) control over the entity, irrespective of the percentage owned.
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Answer: D
Objective: LO1.2 Learn about alternative forms of business combinations, from both the legal and accounting
perspectives.
Difficulty: Easy
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AACSB: Analytical thinking
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, 4) Historically, much of the controversy concerning accounting requirements for business combinations
involved the ________ method.
A) purchase
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B) pooling of interests
C) equity
D) acquisition
Answer: B
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Objective: LO1.2 Learn about alternative forms of business combinations, from both the legal and accounting
perspectives.
Difficulty: Easy
AACSB: Analytical thinking
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5) Pitch Co. paid $50,000 in fees to its accountants and lawyers in acquiring Slope Company. Pitch will
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treat the $50,000 as
A) an expense for the current year.
B) a prior period adjustment to retained earnings.
C) additional cost to investment of Slope on the consolidated balance sheet.
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D) a reduction in additional paid-in capital.
Answer: A
Objective: LO1.3 Introduce accounting concepts for business combinations, emphasizing the acquisition method.
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Difficulty: Moderate
AACSB: Application of knowledge

6) Picasso Co. issued 5,000 shares of its $1 par common stock, valued at $100,000, to acquire shares of
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Seurat Company in an all-stock transaction. Picasso paid the investment bankers $35,000 and will treat
the investment banker fee as
A) an expense for the current year.
B) a prior period adjustment to Retained Earnings.
C) additional goodwill on the consolidated balance sheet.
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D) a reduction to additional paid-in capital.
Answer: D
Objective: LO1.3 Introduce accounting concepts for business combinations, emphasizing the acquisition method.
Difficulty: Moderate
AACSB: Application of knowledge
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7) Durer Inc. acquired Sea Corporation in a business combination and Sea Corp. went out of existence.
Sea Corp. developed a patent listed as an asset on Sea Corp.'s books at the patent office filing cost. In
recording the combination,
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A) fair value is not assigned to the patent because the research and development costs have been
expensed by Sea Corp.
B) Sea Corp.'s prior expenses to develop the patent are recorded as an asset by Durer at purchase.
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C) the patent is recorded as an asset at fair market value.
D) the patent's market value increases goodwill.
Answer: C
Objective: LO1.4 See how firms record fair values of assets and liabilities in an acquisition.
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Difficulty: Moderate
AACSB: Analytical thinking




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