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