Test Bank
Advanced Financial Accounting
By Theodore Christensen
13th Edition
,Table Of Contents
1. Intercorporate Acquisitions And Investments In Other Entities
2. Reporting Intercorporate Investments And Consolidation Of Wholly Owned Subsidiaries
With No Differential
3. The Reporting Entity And The Consolidation Of Less-Than-Wholly-Owned Subsidiaries
With Nodifferential
4. Consolidation Of Wholly Owned Subsidiaries Acquired At More Than Book Value
5. Consolidation Of Less-Than-Wholly-Owned Subsidiaries Acquired At More Than Book
Value
6. Intercompany Inventory Transactions
7. Intercompany Transfers Of Services And Noncurrent Assets
8. Intercompany Indebtedness
9. Consolidation Ownership Issues
10. Additional Consolidation Reporting Issues
11. Multinational Accounting: Foreign Currency Transactions And Financial Instruments
12. Multinational Accounting: Issues In Financial Reporting And Translation Of Foreign
Entity Statements
13. Segment And Interim Reporting
14. Sec Reporting
15. Partnerships: Formation, Operation, And Changes In Membership
16. Partnerships: Liquidation
17. Governmental Entities: Introduction And General Fund Accounting
18. Governmental Entities: Special Funds And Governmentwide Financial Statements
19. Not-For-Profit Entities
20. Corporations In Financial Difficulty
,Solutions Test Bank For
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 to
another 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.; 01-03
make calculations and prepare journal entries for the creation of a business entity.
Bloom's: remember aacsb:
reflective thinking
aicpa: fn decision making
2) Given the increased development of complex business structures, which of the following
regulators 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 of
business expansion, the types of organizational structures, and the types of acquisitions.
Bloom's: remember aacsb:
reflective thinking
aicpa: fn reporting
3) A business combination in which the acquired company's assets and liabilities are combined
with 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 of
business combinations.
Bloom's: remember aacsb:
reflective thinking
aicpa: fn decision making
4) In which of the following situations do accounting standards not require that the financial
statements 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 of
business expansion, the types of organizational structures, and the types of acquisitions.
Bloom's: remember aacsb:
reflective thinking
aicpa: 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:
A) Building at $180,000 and no accumulated depreciation.
B) Building at $162,000 and no accumulated depreciation.
C) Building at $200,000 and accumulated depreciation of $24,000.
D) Building at $180,000 and accumulated depreciation of $18,000.
Answer: d
difficulty: 2 medium
Topic: valuation of business entities; accounting for internal expansion: creating business
entities
Learning objective: 01-04 understand and explain the differences between different forms of
business combinations.; 01-03 make calculations and prepare journal entries for the creation of a
business entity.
Bloom's: understand aacsb:
analytical thinking
aicpa: fn measurement
Advanced Financial Accounting
By Theodore Christensen
13th Edition
,Table Of Contents
1. Intercorporate Acquisitions And Investments In Other Entities
2. Reporting Intercorporate Investments And Consolidation Of Wholly Owned Subsidiaries
With No Differential
3. The Reporting Entity And The Consolidation Of Less-Than-Wholly-Owned Subsidiaries
With Nodifferential
4. Consolidation Of Wholly Owned Subsidiaries Acquired At More Than Book Value
5. Consolidation Of Less-Than-Wholly-Owned Subsidiaries Acquired At More Than Book
Value
6. Intercompany Inventory Transactions
7. Intercompany Transfers Of Services And Noncurrent Assets
8. Intercompany Indebtedness
9. Consolidation Ownership Issues
10. Additional Consolidation Reporting Issues
11. Multinational Accounting: Foreign Currency Transactions And Financial Instruments
12. Multinational Accounting: Issues In Financial Reporting And Translation Of Foreign
Entity Statements
13. Segment And Interim Reporting
14. Sec Reporting
15. Partnerships: Formation, Operation, And Changes In Membership
16. Partnerships: Liquidation
17. Governmental Entities: Introduction And General Fund Accounting
18. Governmental Entities: Special Funds And Governmentwide Financial Statements
19. Not-For-Profit Entities
20. Corporations In Financial Difficulty
,Solutions Test Bank For
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 to
another 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.; 01-03
make calculations and prepare journal entries for the creation of a business entity.
Bloom's: remember aacsb:
reflective thinking
aicpa: fn decision making
2) Given the increased development of complex business structures, which of the following
regulators 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 of
business expansion, the types of organizational structures, and the types of acquisitions.
Bloom's: remember aacsb:
reflective thinking
aicpa: fn reporting
3) A business combination in which the acquired company's assets and liabilities are combined
with 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 of
business combinations.
Bloom's: remember aacsb:
reflective thinking
aicpa: fn decision making
4) In which of the following situations do accounting standards not require that the financial
statements 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 of
business expansion, the types of organizational structures, and the types of acquisitions.
Bloom's: remember aacsb:
reflective thinking
aicpa: 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:
A) Building at $180,000 and no accumulated depreciation.
B) Building at $162,000 and no accumulated depreciation.
C) Building at $200,000 and accumulated depreciation of $24,000.
D) Building at $180,000 and accumulated depreciation of $18,000.
Answer: d
difficulty: 2 medium
Topic: valuation of business entities; accounting for internal expansion: creating business
entities
Learning objective: 01-04 understand and explain the differences between different forms of
business combinations.; 01-03 make calculations and prepare journal entries for the creation of a
business entity.
Bloom's: understand aacsb:
analytical thinking
aicpa: fn measurement
