Test Bank
Advanced Accounting
,Chapter 1
Multiple Choice Questions
1. At The Date Of An Acquisition Which Is Not A Bargain Purchase,
The Acquisition Method
A. Consolidates The Subsidiary's Assets At Fair Value And The Liabilities
At Book Value.
B. Consolidates All Subsidiary Assets And Liabilities
At Book Value.
C. Consolidates All Subsidiary Assets And Liabilities
At Fair Value.
D. Consolidates Current Assets And Liabilities At Book Value, Long-
Term Assets And Liabilities At Fair Value.
E. Consolidates The Subsidiary's Assets At Book Value And The
Liabilities At Fair Value.
,2. In An Acquisition Where Control Is Achieved, How Would The Land
Accounts Of The Parent And The Land Accounts Of The Subsidiary
Be Combined?
A. Option
A
B. Option
B
C. Option
C
D. Option
D
E. Option
E
3. Lisa Co. Paid Cash For All Of The Voting Common Stock Of Victoria
Corp. Victoria Will Continue To Exist As A Separate Corporation. Entries
For The Consolidation Of Lisa And Victoria Would Be Recorded In
A. A
Worksheet.
B. Lisa's
General
Journal.
C. Victoria's General
Journal.
D. Victoria's Secret
Consolidation Journal.
E. The General Journals Of
Both Companies.
,4. Using The Acquisition Method For A Business Combination, Goodwill
Is Generally Defined As:
A. Cost Of The Investment Less The Subsidiary's Book Value At
The Beginning Of The Year.
B. Cost Of The Investment Less The Subsidiary's Book Value At
The Acquisition Date.
C. Cost Of The Investment Less The Subsidiary's Fair Value At
The Beginning Of The Year.
D. Cost Of The Investment Less The Subsidiary's Fair Value
At Acquisition Date.
E. Is No Longer Allowed
Under Federal Law.
5. Direct Combination Costs And Stock Issuance Costs Are Often Incurred
In The Process Of Making A Controlling Investment In Another Company.
How Should Those Costs Be Accounted For In A Pre-2009 Purchase
Transaction?
A. Option
A
B. Option
B
C. Option
C
D. Option
D
E. Option
E
,6. How Are Direct And Indirect Costs Accounted For When Applying
The Acquisition Method For A Business Combination?
A. Option
A
B. Option
B
C. Option
C
D. Option
D
E. Option
E
7. What Is The Primary Accounting Difference Between Accounting For
When The Subsidiary Is Dissolved And When The Subsidiary Retains
Its Incorporation?
A. If The Subsidiary Is Dissolved, It Will Not Be Operated As
A Separate Division.
B. If The Subsidiary Is Dissolved, Assets And Liabilities Are
Consolidated At Their Book Values.
C. If The Subsidiary Retains Its Incorporation, There Will Be No
Goodwill Associated With The Acquisition.
D. If The Subsidiary Retains Its Incorporation, Assets And Liabilities
Are Consolidated At Their Book Values.
E. If The Subsidiary Retains Its Incorporation, The Consolidation Is
Not Formally Recorded In The Accounting Records Of The
Acquiring Company.
,8. According To Gaap, The Pooling Of Interest Method For
Business Combinations
A. Is Preferred To The
Purchase Method.
B. Is Allowed For All
New Acquisitions.
C. Is No Longer Allowed For Business Combinations After
June 30, 2001.
D. Is No Longer Allowed For Business Combinations After
December 31, 2001.
E. Is Only Allowed For Large Corporate Mergers Like
Exxon And Mobil.
9. An Example Of A Difference In Types Of Business Combination Is:
A. A Statutory Merger Can Only Be Effected By An Asset Acquisition
While A Statutory Consolidation Can Only Be Effected By A
Capital Stock Acquisition.
B. A Statutory Merger Can Only Be Effected By A Capital Stock
Acquisition While A Statutory Consolidation Can Only Be Effected
By An Asset Acquisition.
C. A Statutory Merger Requires Dissolution Of The Acquired
Company While A Statutory Consolidation Does Not Require
Dissolution.
D. A Statutory Consolidation Requires Dissolution Of The Acquired
Company While A Statutory Merger Does Not Require
Dissolution.
E. Both A Statutory Merger And A Statutory Consolidation Can Only
Be Effected By An Asset Acquisition But Only A Statutory
Consolidation Requires Dissolution Of The Acquired Company.
,10 Acquired In-Process Research And Development Is Considered As
.
A. A Definite-Lived Asset Subject
To Amortization.
B. A Definite-Lived Asset Subject To Testing
For Impairment.
C. An Indefinite-Lived Asset Subject
To Amortization.
D. An Indefinite-Lived Asset Subject To Testing
For Impairment.
E. A Research And Development Expense At The Date
Of Acquisition.
11 Which One Of The Following Is A Characteristic Of A Business Combination
. Accounted For As An Acquisition?
A. The Combination Must Involve The Exchange Of Equity
Securities Only.
B. The Transaction Establishes An Acquisition Fair Value Basis For
The Company Being Acquired.
C. The Two Companies May Be About The Same Size, And It Is Difficult
To Determine The Acquired Company And The Acquiring Company.
D. The Transaction May Be Considered To Be The Uniting Of
The Ownership Interests Of The Companies Involved.
E. The Acquired Subsidiary Must Be Smaller In Size Than
The Acquiring Parent.
, 12 Which One Of The Following Is A Characteristic Of A Business
Combination
. That Is Accounted For As An Acquisition?
A. Fair Value Only For Items Received By The Acquirer Can Enter Into
The Determination Of The Acquirer's Accounting Valuation Of The
Acquired Company.
B. Fair Value Only For The Consideration Transferred By The Acquirer
Can Enter Into The Determination Of The Acquirer's Accounting
Valuation Of The Acquired Company.
C. Fair Value For The Consideration Transferred By The Acquirer As Well
As The Fair Value Of Items Received By The Acquirer Can Enter Into
The Determination Of The Acquirer's Accounting Valuation Of The
Acquired Company.
D. Fair Value For Only Consideration Transferred And Identifiable
Assets Received By The Acquirer Can Enter Into The Determination
Of The Acquirer's Accounting Valuation Of The Acquired Company.
E. Only Fair Value Of Identifiable Assets Received Enters Into The
Determination Of The Acquirer's Accounting Valuation Of The
Acquired Company.
13 A Statutory Merger Is A(N)
.
A. Business Combination In Which Only One Of The Two
Companies Continues To Exist As A Legal Corporation.
B. Business Combination In Which Both Companies Continues
To Exist.
C. Acquisition Of
A Competitor.
D. Acquisition Of A Supplier Or
A Customer.
E. Legal Proposal To Acquire Outstanding Shares Of
The Target's Stock.
Advanced Accounting
,Chapter 1
Multiple Choice Questions
1. At The Date Of An Acquisition Which Is Not A Bargain Purchase,
The Acquisition Method
A. Consolidates The Subsidiary's Assets At Fair Value And The Liabilities
At Book Value.
B. Consolidates All Subsidiary Assets And Liabilities
At Book Value.
C. Consolidates All Subsidiary Assets And Liabilities
At Fair Value.
D. Consolidates Current Assets And Liabilities At Book Value, Long-
Term Assets And Liabilities At Fair Value.
E. Consolidates The Subsidiary's Assets At Book Value And The
Liabilities At Fair Value.
,2. In An Acquisition Where Control Is Achieved, How Would The Land
Accounts Of The Parent And The Land Accounts Of The Subsidiary
Be Combined?
A. Option
A
B. Option
B
C. Option
C
D. Option
D
E. Option
E
3. Lisa Co. Paid Cash For All Of The Voting Common Stock Of Victoria
Corp. Victoria Will Continue To Exist As A Separate Corporation. Entries
For The Consolidation Of Lisa And Victoria Would Be Recorded In
A. A
Worksheet.
B. Lisa's
General
Journal.
C. Victoria's General
Journal.
D. Victoria's Secret
Consolidation Journal.
E. The General Journals Of
Both Companies.
,4. Using The Acquisition Method For A Business Combination, Goodwill
Is Generally Defined As:
A. Cost Of The Investment Less The Subsidiary's Book Value At
The Beginning Of The Year.
B. Cost Of The Investment Less The Subsidiary's Book Value At
The Acquisition Date.
C. Cost Of The Investment Less The Subsidiary's Fair Value At
The Beginning Of The Year.
D. Cost Of The Investment Less The Subsidiary's Fair Value
At Acquisition Date.
E. Is No Longer Allowed
Under Federal Law.
5. Direct Combination Costs And Stock Issuance Costs Are Often Incurred
In The Process Of Making A Controlling Investment In Another Company.
How Should Those Costs Be Accounted For In A Pre-2009 Purchase
Transaction?
A. Option
A
B. Option
B
C. Option
C
D. Option
D
E. Option
E
,6. How Are Direct And Indirect Costs Accounted For When Applying
The Acquisition Method For A Business Combination?
A. Option
A
B. Option
B
C. Option
C
D. Option
D
E. Option
E
7. What Is The Primary Accounting Difference Between Accounting For
When The Subsidiary Is Dissolved And When The Subsidiary Retains
Its Incorporation?
A. If The Subsidiary Is Dissolved, It Will Not Be Operated As
A Separate Division.
B. If The Subsidiary Is Dissolved, Assets And Liabilities Are
Consolidated At Their Book Values.
C. If The Subsidiary Retains Its Incorporation, There Will Be No
Goodwill Associated With The Acquisition.
D. If The Subsidiary Retains Its Incorporation, Assets And Liabilities
Are Consolidated At Their Book Values.
E. If The Subsidiary Retains Its Incorporation, The Consolidation Is
Not Formally Recorded In The Accounting Records Of The
Acquiring Company.
,8. According To Gaap, The Pooling Of Interest Method For
Business Combinations
A. Is Preferred To The
Purchase Method.
B. Is Allowed For All
New Acquisitions.
C. Is No Longer Allowed For Business Combinations After
June 30, 2001.
D. Is No Longer Allowed For Business Combinations After
December 31, 2001.
E. Is Only Allowed For Large Corporate Mergers Like
Exxon And Mobil.
9. An Example Of A Difference In Types Of Business Combination Is:
A. A Statutory Merger Can Only Be Effected By An Asset Acquisition
While A Statutory Consolidation Can Only Be Effected By A
Capital Stock Acquisition.
B. A Statutory Merger Can Only Be Effected By A Capital Stock
Acquisition While A Statutory Consolidation Can Only Be Effected
By An Asset Acquisition.
C. A Statutory Merger Requires Dissolution Of The Acquired
Company While A Statutory Consolidation Does Not Require
Dissolution.
D. A Statutory Consolidation Requires Dissolution Of The Acquired
Company While A Statutory Merger Does Not Require
Dissolution.
E. Both A Statutory Merger And A Statutory Consolidation Can Only
Be Effected By An Asset Acquisition But Only A Statutory
Consolidation Requires Dissolution Of The Acquired Company.
,10 Acquired In-Process Research And Development Is Considered As
.
A. A Definite-Lived Asset Subject
To Amortization.
B. A Definite-Lived Asset Subject To Testing
For Impairment.
C. An Indefinite-Lived Asset Subject
To Amortization.
D. An Indefinite-Lived Asset Subject To Testing
For Impairment.
E. A Research And Development Expense At The Date
Of Acquisition.
11 Which One Of The Following Is A Characteristic Of A Business Combination
. Accounted For As An Acquisition?
A. The Combination Must Involve The Exchange Of Equity
Securities Only.
B. The Transaction Establishes An Acquisition Fair Value Basis For
The Company Being Acquired.
C. The Two Companies May Be About The Same Size, And It Is Difficult
To Determine The Acquired Company And The Acquiring Company.
D. The Transaction May Be Considered To Be The Uniting Of
The Ownership Interests Of The Companies Involved.
E. The Acquired Subsidiary Must Be Smaller In Size Than
The Acquiring Parent.
, 12 Which One Of The Following Is A Characteristic Of A Business
Combination
. That Is Accounted For As An Acquisition?
A. Fair Value Only For Items Received By The Acquirer Can Enter Into
The Determination Of The Acquirer's Accounting Valuation Of The
Acquired Company.
B. Fair Value Only For The Consideration Transferred By The Acquirer
Can Enter Into The Determination Of The Acquirer's Accounting
Valuation Of The Acquired Company.
C. Fair Value For The Consideration Transferred By The Acquirer As Well
As The Fair Value Of Items Received By The Acquirer Can Enter Into
The Determination Of The Acquirer's Accounting Valuation Of The
Acquired Company.
D. Fair Value For Only Consideration Transferred And Identifiable
Assets Received By The Acquirer Can Enter Into The Determination
Of The Acquirer's Accounting Valuation Of The Acquired Company.
E. Only Fair Value Of Identifiable Assets Received Enters Into The
Determination Of The Acquirer's Accounting Valuation Of The
Acquired Company.
13 A Statutory Merger Is A(N)
.
A. Business Combination In Which Only One Of The Two
Companies Continues To Exist As A Legal Corporation.
B. Business Combination In Which Both Companies Continues
To Exist.
C. Acquisition Of
A Competitor.
D. Acquisition Of A Supplier Or
A Customer.
E. Legal Proposal To Acquire Outstanding Shares Of
The Target's Stock.
