Advanced Accounting 12th Edition by Paul Fischer__Comprehensive Test Bank |ISBN: 9780357671221| Guide A+

TEST BANK
Advanced Accounting
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Paul Fischer

12th Edition
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, Table of Contents
1. Business Combinations: New Rules for a Long-Standing Business Practice
2. Consolidated Statements: Date of Acquisition
3. Consolidated Statements: Subsequent to Acquisition
4. Intercompany Transactions: Merchandise, Plant Assets, and Notes
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5. Intercompany Transactions: Bonds and Leases
6. Cash Flows, EPS, and Taxation
7. Special Issues in Accounting for an Investment in a Subsidiary
8. Subsidiary Equity Transactions; Indirect Subsidiary Ownership and Subsidiary Ownership of Parent Shares
- Appendix 1: Accounting for Influential Investments
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- Appendix 2: Variable Interest Entities
9. The International Accounting Environment (Module: Derivatives and Related Accounting Issues)
10. Foreign Currency Transactions
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11. Translation of Foreign Financial Statements
12. Interim Reporting and Disclosures about Segments of an Enterprise
13. Partnerships: Characteristics, Formation, and Accounting for Activities
14. Partnerships: Ownership Changes and Liquidations
15. Governmental Accounting: The General Fund and the Account Groups
16. Governmental Accounting: Other Governmental Funds, Proprietary Funds, and Fiduciary Funds
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17. Financial Reporting Issues
18. Accounting for Private Not-for-Profit Organizations
19. Accounting for Not-for-Profit Colleges and Universities and Health Care Organizations
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20. Estates and Trusts: Their Nature and the Accountant’s Role
21. Debt Restructuring, Corporate Reorganizations, and Liquidations
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, Chapter 01—Business Combinations: New Rules for a Long-Standing Business Practice
Multiple Choice

1. An economic advantage of a business combination includes:
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a. Utilizing duplicative assets.
b. Creating separate management teams.
c. Shared fixed costs.
d. Horizontally combining levels within the marketing
chain.
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ANSWER: c
RATIONALE: Business combinations may viewed as a way to take advantage of economies of scale by
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utilizing common facilities and sharing fixed costs.
DIFFICULTY: E
LEARNING OBJECTIVES: ADAC.FISC.1-1

2. One large bank’s acquisition of another bank would be an example of a:
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a. market extension merger.
b. conglomerate merger.
c. product extension merger.
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d. horizontal merger.
ANSWER: d
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RATIONALE: A horizontal merger occurs when two companies offering similar products or services that
are likely competitors in the same marketplace merge.
DIFFICULTY: M
LEARNING OBJECTIVES: ADAC.FISC.1-1

3. A large nation-wide bank’s acquisition of a major investment advisory firm would be an example of a:
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a. market extension merger.
b. conglomerate merger.
c. product extension merger.
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d. horizontal merger.
ANSWER: c
RATIONALE: A product extension merger occurs when the acquiring company is expanding its product
offerings in the market place in which it sells.
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DIFFICULTY: M
LEARNING OBJECTIVES: OBJ: ADAC.FISC.1-1

4. A building materials company’s acquisition of a television station would be an example of a:
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a. market extension merger.
b. conglomerate merger.
c. product extension merger.
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d. horizontal merger.
ANSWER: b
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RATIONALE: Because these firms are in unrelated lines of business, this would be a conglomerate
merger.
DIFFICULTY: M

, LEARNING OBJECTIVES: ADAC.FISC.1-1

5. A tax advantage of business combination can occur when the existing owner of a company sells out and receives:
a. cash to defer the taxable gain as a "tax-free reorganization."
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b. stock to defer the taxable gain as a "tax-free
reorganization."
c. cash to create a taxable gain.
d. stock to create a taxable gain.
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ANSWER: b
RATIONALE: If the owners of a business sell their interests for cash or accept debt instruments, they would
have an immediate taxable gain. However, if they accept common stock of another
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corporation and the transaction is crafted as such, they may account for the transaction as a
“tax-free reorganization.” If this is the case, no taxes are paid until they sell the shares
received in the transaction.
DIFFICULTY: E
LEARNING OBJECTIVES: ADAC.FISC.1-1
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6. A controlling interest in a company implies that the parent company
a. owns all of the subsidiary's stock.
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b. has acquired a majority of the subsidiary's common stock.
c. has paid cash for a majority of the subsidiary's stock.
d. has transferred common stock for a majority of the subsidiary's outstanding bonds and
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debentures.
ANSWER: b
RATIONALE: Typically, a controlling interest is over 50% of the company’s voting stock.
DIFFICULTY: E
LEARNING OBJECTIVES: ADAC.FISC.1-2
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7. Some advantages of obtaining control by acquiring a controlling interest in stock include all but:
a. Negotiations are made directly with the acquiree’s management.
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b. The legal liability of each corporation is limited to its own assets.
c. The cost may be lower since only a controlling interest in the assets, not the total assets, is
acquired.
d. Tax advantages may result from preservation of the legal entities.
ANSWER: a
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RATIONALE: If a company was acquiring a controlling interest in stock, the negotiations would be with the
target company’s stockholders.
DIFFICULTY: M
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LEARNING OBJECTIVES: ADAC.FISC.1-2

8. A(n) occurs when the management of the target company purchases a controlling interest in that
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company and the company incurs a significant amount of debt as a result.
a. greenmail
b. statutory merger
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c. poison pill
d. leveraged buyout