Test Bank for Advanced Financial Accounting
a a a a a a
13th Edition
a ca
By Theodore
c a c c c a
Christensen
c
, Table Of Contents:
c c
1. Intercorporate Acquisitions and Investments in Other Entities
c c c c c c
2. Reporting Intercorporate Investments and Consolidation of Wholly Owned
c c c c c c c
cSubsidiaries with No Differentialc c c
3. The Reporting Entity and the Consolidation of Less-Than-Wholly-Owned
c c c c c c c
cSubsidiaries with NoDifferential c c
4. Consolidation of Wholly Owned Subsidiaries Acquired at More Than Book Value
c c c c c c c c c c
5. Consolidation of Less-Than-Wholly-Owned Subsidiaries Acquired at More ThanBook
c c c c c c c c
cValue
6. Intercompany Inventory Transactions c c
7. Intercompany Transfers of Services and Noncurrent Assets
c c c c c c
8. Intercompany Indebtedness c
9. Consolidation Ownership Issues c c
10. Additional Consolidation Reporting Issues
c c c
11. Multinational Accounting: Foreign Currency Transactions and Financial
c c c c c c
cInstruments
12. Multinational Accounting: Issues in Financial Reporting and Translation of
c c c c c c c c
c ForeignEntity Statements
c c
13. Segment and Interim Reporting
c c c
14. SEC Reportingc
15. Partnerships: Formation, Operation, and Changes in Membership
c c c c c c
16. Partnerships: Liquidation c
17. Governmental Entities: Introduction and General Fund Accounting c c c c c c
18. Governmental Entities: Special Funds and Governmentwide Financial Statements
c c c c c c c
19. Not-for-Profit Entities c
20. Corporations in Financial Difficulty c c c
,TEST BANK FOR c c
Advanced Financial Accounting 13th Edition By Theodore Christensen c c c c c c c
Chapter 1 Intercorporate c cc c c Acquisitions and Investments in Other Entities c c c c c
1) Assuming no impairment in value prior to transfer, assets transferred by a parent company to
c c c c c c c c c c c c c c
another entity it has created should be recorded by the newly created entity at the assets':
c c c c c c c c c c c c c c c c
A) cost to the parent company.
c c c c
B) book value on the parent company's books at the date of transfer.
c c c c c c c c c c c
C) fair value at the date of transfer.
c c c c c c
D) fair value of consideration exchanged by the newly created entity.
c c c c c c c c c
Answer: B c
Difficulty: 1
c c
Easy
c
Topic: Internal Expansion: Creating a Business Entity; Valuation of Business Entities
c c c c c c c c c c
Learning Objective: 01-01 Understand and explain the reasons for and different methods of
c c c c c c c c c c c c c
business expansion, the types of organizational structures, and the types of acquisitions.;
c c c c c c c c c c c c
c01- 03 Make calculations and prepare journal entries for the creation of a business entity.
c c c c c c c c c c c c c c
Bloom's: Remember c
AACSB: Reflective
c c
Thinking AICPA: FN
c c c
Decision Making
c c
2) Given the increased development of complex business structures, which of the
c c c c c c c c c c
followingregulators is responsible for the continued usefulness of accounting reports?
c c c c c c c c c c c
A) Securities and Exchange Commission (SEC) c c c cc
B) Public Company Accounting Oversight Board (PCAOB)
c c c c c
C) Financial Accounting Standards Board (FASB) c c c c
D) All of the other answers are correct
c c c c c c
Answer: D c
Difficulty: 1
c c
Easy
c
Topic: An Introduction to Complex Business Structures c c c c c
Learning Objective: 01-01 Understand and explain the reasons for and different methods of
c c c c c c c c c c c c
business expansion, the types of organizational structures, and the types of acquisitions.
c c c c c c c c c c c c
Bloom's: Remember c
AACSB: Reflective
c c
Thinking AICPA: FN
c c c
Reporting
c
3) A business combination in which the acquired company's assets and liabilities are
c c c c c c c c c c c
combinedwith those of the acquiring company into a single entity is defined as:
c c c c c c c c c c c c c c
A) Stock acquisition c
B) Leveraged buyout c
C) Statutory Merger c
D) Reverse statutory rollup c c
, Answer: C c
Difficulty: 1
c c
Easy
c
Topic: Organizational Structure and Financial Reporting c c c c
Learning Objective: 01-04 Understand and explain the differences between different forms of
c c c c c c c c c c c
business combinations.
c c
Bloom's: Remember c
AACSB: Reflective
c c
Thinking AICPA: FN
c c c
Decision Making
c c
4) In which of the following situations do accounting standards not require that the financial
c c c c c c c c c c c c c
statements of the parent and subsidiary be consolidated?
c c c c c c c c
A) A corporation creates a new 100 percent owned subsidiary
c c c c c c c c
B) A corporation purchases 90 percent of the voting stock of another company
c c c c c c c c c c c
C) A corporation has both control and majority ownership of an unincorporated company
c c c c c c c c c c c
D) A corporation owns less-than a controlling interest in an unincorporated company
c c c c c c c c c c
Answer: D c
Difficulty: 1
c c
Easy
c
Topic: Organizational Structure and Financial Reporting c c c c
Learning Objective: 01-01 Understand and explain the reasons for and different methods of
c c c c c c c c c c c c
business expansion, the types of organizational structures, and the types of acquisitions.
c c c c c c c c c c c c
Bloom's: Remember c
AACSB: Reflective
c c
Thinking AICPA: FN
c c c
Decision Making
c c
During its inception, Devon Company purchased land for $100,000 and a building for
c c c c c c c c c c c c
$180,000. After exactly 3 years, it transferred these assets and cash of $50,000 to a newly created
c c c c c c c c c c c c c c c c
subsidiary, Regan Company, in exchange for 15,000 shares of Regan's $10 par value
c c c c c c c c c c c c c
cstock.
Devon uses straight-line depreciation. Useful life for the building is 30 years, with zero
c c c c c c c c c c c c c
residual value. An appraisal revealed that the building has a fair value of $200,000.
c c c c c c c c c c c c c c
5) Based on the information provided, at the time of the transfer, Regan Company should record:
c c c c c c c c c c c c c c
A) Building at $180,000 and no accumulated depreciation.
c c c c c c
B) Building at $162,000 and no accumulated depreciation.
c c c c c c
C) Building at $200,000 and accumulated depreciation of $24,000.
c c c c c c c
D) Building at $180,000 and accumulated depreciation of $18,000.
c c c c c c c
Answer: D c
Difficulty: 2
c c
Medium
c
Topic: Valuation of Business Entities; Accounting for Internal Expansion: Creating c c c c c c c c
cBusinessEntities c
Learning Objective: 01-04 Understand and explain the differences between different
c ccc c c c c c c c
cforms of business combinations.; 01-03 Make calculations and prepare journal entries for
c c c c c c c c c c c
cthe creation of a business entity.
c c c c c
Bloom's: Understand
AACSB: Analytical
c
a a a a a a
13th Edition
a ca
By Theodore
c a c c c a
Christensen
c
, Table Of Contents:
c c
1. Intercorporate Acquisitions and Investments in Other Entities
c c c c c c
2. Reporting Intercorporate Investments and Consolidation of Wholly Owned
c c c c c c c
cSubsidiaries with No Differentialc c c
3. The Reporting Entity and the Consolidation of Less-Than-Wholly-Owned
c c c c c c c
cSubsidiaries with NoDifferential c c
4. Consolidation of Wholly Owned Subsidiaries Acquired at More Than Book Value
c c c c c c c c c c
5. Consolidation of Less-Than-Wholly-Owned Subsidiaries Acquired at More ThanBook
c c c c c c c c
cValue
6. Intercompany Inventory Transactions c c
7. Intercompany Transfers of Services and Noncurrent Assets
c c c c c c
8. Intercompany Indebtedness c
9. Consolidation Ownership Issues c c
10. Additional Consolidation Reporting Issues
c c c
11. Multinational Accounting: Foreign Currency Transactions and Financial
c c c c c c
cInstruments
12. Multinational Accounting: Issues in Financial Reporting and Translation of
c c c c c c c c
c ForeignEntity Statements
c c
13. Segment and Interim Reporting
c c c
14. SEC Reportingc
15. Partnerships: Formation, Operation, and Changes in Membership
c c c c c c
16. Partnerships: Liquidation c
17. Governmental Entities: Introduction and General Fund Accounting c c c c c c
18. Governmental Entities: Special Funds and Governmentwide Financial Statements
c c c c c c c
19. Not-for-Profit Entities c
20. Corporations in Financial Difficulty c c c
,TEST BANK FOR c c
Advanced Financial Accounting 13th Edition By Theodore Christensen c c c c c c c
Chapter 1 Intercorporate c cc c c Acquisitions and Investments in Other Entities c c c c c
1) Assuming no impairment in value prior to transfer, assets transferred by a parent company to
c c c c c c c c c c c c c c
another entity it has created should be recorded by the newly created entity at the assets':
c c c c c c c c c c c c c c c c
A) cost to the parent company.
c c c c
B) book value on the parent company's books at the date of transfer.
c c c c c c c c c c c
C) fair value at the date of transfer.
c c c c c c
D) fair value of consideration exchanged by the newly created entity.
c c c c c c c c c
Answer: B c
Difficulty: 1
c c
Easy
c
Topic: Internal Expansion: Creating a Business Entity; Valuation of Business Entities
c c c c c c c c c c
Learning Objective: 01-01 Understand and explain the reasons for and different methods of
c c c c c c c c c c c c c
business expansion, the types of organizational structures, and the types of acquisitions.;
c c c c c c c c c c c c
c01- 03 Make calculations and prepare journal entries for the creation of a business entity.
c c c c c c c c c c c c c c
Bloom's: Remember c
AACSB: Reflective
c c
Thinking AICPA: FN
c c c
Decision Making
c c
2) Given the increased development of complex business structures, which of the
c c c c c c c c c c
followingregulators is responsible for the continued usefulness of accounting reports?
c c c c c c c c c c c
A) Securities and Exchange Commission (SEC) c c c cc
B) Public Company Accounting Oversight Board (PCAOB)
c c c c c
C) Financial Accounting Standards Board (FASB) c c c c
D) All of the other answers are correct
c c c c c c
Answer: D c
Difficulty: 1
c c
Easy
c
Topic: An Introduction to Complex Business Structures c c c c c
Learning Objective: 01-01 Understand and explain the reasons for and different methods of
c c c c c c c c c c c c
business expansion, the types of organizational structures, and the types of acquisitions.
c c c c c c c c c c c c
Bloom's: Remember c
AACSB: Reflective
c c
Thinking AICPA: FN
c c c
Reporting
c
3) A business combination in which the acquired company's assets and liabilities are
c c c c c c c c c c c
combinedwith those of the acquiring company into a single entity is defined as:
c c c c c c c c c c c c c c
A) Stock acquisition c
B) Leveraged buyout c
C) Statutory Merger c
D) Reverse statutory rollup c c
, Answer: C c
Difficulty: 1
c c
Easy
c
Topic: Organizational Structure and Financial Reporting c c c c
Learning Objective: 01-04 Understand and explain the differences between different forms of
c c c c c c c c c c c
business combinations.
c c
Bloom's: Remember c
AACSB: Reflective
c c
Thinking AICPA: FN
c c c
Decision Making
c c
4) In which of the following situations do accounting standards not require that the financial
c c c c c c c c c c c c c
statements of the parent and subsidiary be consolidated?
c c c c c c c c
A) A corporation creates a new 100 percent owned subsidiary
c c c c c c c c
B) A corporation purchases 90 percent of the voting stock of another company
c c c c c c c c c c c
C) A corporation has both control and majority ownership of an unincorporated company
c c c c c c c c c c c
D) A corporation owns less-than a controlling interest in an unincorporated company
c c c c c c c c c c
Answer: D c
Difficulty: 1
c c
Easy
c
Topic: Organizational Structure and Financial Reporting c c c c
Learning Objective: 01-01 Understand and explain the reasons for and different methods of
c c c c c c c c c c c c
business expansion, the types of organizational structures, and the types of acquisitions.
c c c c c c c c c c c c
Bloom's: Remember c
AACSB: Reflective
c c
Thinking AICPA: FN
c c c
Decision Making
c c
During its inception, Devon Company purchased land for $100,000 and a building for
c c c c c c c c c c c c
$180,000. After exactly 3 years, it transferred these assets and cash of $50,000 to a newly created
c c c c c c c c c c c c c c c c
subsidiary, Regan Company, in exchange for 15,000 shares of Regan's $10 par value
c c c c c c c c c c c c c
cstock.
Devon uses straight-line depreciation. Useful life for the building is 30 years, with zero
c c c c c c c c c c c c c
residual value. An appraisal revealed that the building has a fair value of $200,000.
c c c c c c c c c c c c c c
5) Based on the information provided, at the time of the transfer, Regan Company should record:
c c c c c c c c c c c c c c
A) Building at $180,000 and no accumulated depreciation.
c c c c c c
B) Building at $162,000 and no accumulated depreciation.
c c c c c c
C) Building at $200,000 and accumulated depreciation of $24,000.
c c c c c c c
D) Building at $180,000 and accumulated depreciation of $18,000.
c c c c c c c
Answer: D c
Difficulty: 2
c c
Medium
c
Topic: Valuation of Business Entities; Accounting for Internal Expansion: Creating c c c c c c c c
cBusinessEntities c
Learning Objective: 01-04 Understand and explain the differences between different
c ccc c c c c c c c
cforms of business combinations.; 01-03 Make calculations and prepare journal entries for
c c c c c c c c c c c
cthe creation of a business entity.
c c c c c
Bloom's: Understand
AACSB: Analytical
c
