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