,TEST BANK FOR br br
Advanced Financial Accounting 13th Edition By Theodore Christensen br br br br br br br
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 an
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other 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 br
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. br 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 typ
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es 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
b Reflective Thinking AICPA:
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FN Decision Making br br
2) Given the increased development of complex business structures, which of the following re
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gulators is responsible for the continued usefulness of accounting reports?
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A) Securities and Exchange Commission (SEC) br b r br 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 br b r
D) All of the other answers are correctbr br br br br br
Answer: D Diffic br br
ulty: 1 Easy br br
Topic: An Introduction to Complex Business Structures br b r br b r b r
Learning Objective: 01- br
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.
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Bloom's:
Remember AACSB: br
b Reflective Thinking AICPA:
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FN Reporting br
3) A business combination in which the acquired company's assets and liabilities are combined w
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ith those of the acquiring company into a single entity is defined as:
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A) Stock acquisition br
B) Leveraged buyout b r
C) Statutory Merger br
,D) Reverse statutory rollup
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, Answer: C Diffic br br
ulty: 1 Easy br br
Topic: Organizational Structure and Financial Reporting br b r b r br
Learning Objective: 01- br
04 Understand and explain the differences between different forms of business combinations.
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Bloom's:
Remember AACSB: br
b 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 financial st
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atements 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 br b r b r br
Learning Objective: 01- br
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.
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Bloom's:
Remember AACSB: br
b 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.
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After exactly 3 years, it transferred these assets and cash of $50,000 to a newly created subsidiary, Re
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gan 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 br br br
B) Building at $162,000 and no accumulated depreciation. br br br br br b r
C) Building at $200,000 and accumulated depreciation of $24,000. br b r b r br b r br br
D) Building at $180,000 and accumulated depreciation of $18,000. br b r b r br b r br br
Answer: D Difficulty br br
: 2 Medium
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Topic:
Valuation of Business Entities; Accounting for Internal Expansion: Creating Business E br br br br br br br br br br
ntities
Learning Objective: 01- br
04 Understand and explain the differences between different forms of business combinations.; 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:
Understand AACSB br
Advanced Financial Accounting 13th Edition By Theodore Christensen br br br br br br br
Chapter 1 Intercorporate Acquisitions and Investments in Other Entities
br b r b r br b r b r b r
1) Assuming no impairment in value prior to transfer, assets transferred by a parent company to an
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other 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 br
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. br 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 typ
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es 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
b Reflective Thinking AICPA:
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FN Decision Making br br
2) Given the increased development of complex business structures, which of the following re
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gulators is responsible for the continued usefulness of accounting reports?
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A) Securities and Exchange Commission (SEC) br b r br 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 br b r
D) All of the other answers are correctbr br br br br br
Answer: D Diffic br br
ulty: 1 Easy br br
Topic: An Introduction to Complex Business Structures br b r br b r b r
Learning Objective: 01- br
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.
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Bloom's:
Remember AACSB: br
b Reflective Thinking AICPA:
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FN Reporting br
3) A business combination in which the acquired company's assets and liabilities are combined w
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ith those of the acquiring company into a single entity is defined as:
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A) Stock acquisition br
B) Leveraged buyout b r
C) Statutory Merger br
,D) Reverse statutory rollup
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, Answer: C Diffic br br
ulty: 1 Easy br br
Topic: Organizational Structure and Financial Reporting br b r b r br
Learning Objective: 01- br
04 Understand and explain the differences between different forms of business combinations.
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Bloom's:
Remember AACSB: br
b Reflective Thinking AICPA:
r br br
FN Decision Making br br
4) In which of the following situations do accounting standards not require that the financial st
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atements 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 br b r b r br
Learning Objective: 01- br
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.
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Bloom's:
Remember AACSB: br
b Reflective Thinking AICPA:
r br br
FN Decision Making br br
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, Re
br br br br br br br br br br br br br br br br br
gan 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
br br br br br br br br br br br br br br br br
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 br br br
B) Building at $162,000 and no accumulated depreciation. br br br br br b r
C) Building at $200,000 and accumulated depreciation of $24,000. br b r b r br b r br br
D) Building at $180,000 and accumulated depreciation of $18,000. br b r b r br b r br br
Answer: D Difficulty br br
: 2 Medium
br br
Topic:
Valuation of Business Entities; Accounting for Internal Expansion: Creating Business E br br br br br br br br br br
ntities
Learning Objective: 01- br
04 Understand and explain the differences between different forms of business combinations.; 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:
Understand AACSB br
