TEST BANK FOR
Advanced Financial Accounting 13th
Edition
By Theodore Christensen, ALL Chapters
(1 - 20)
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
,TEST BANK FOR
Advanced Financial Accounting 13th Edition By Theodore Christensen
Chapter 1 Intercorporate Acquisitions and Investments in Other Entities
• 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':
• cost to the parent company.
• book value on the parent company's books at the date of transfer.
• fair value at the date of transfer.
• 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
• Given the increased development of complex business structures, which
of the followingregulators is responsible for the continued usefulness of accounting
reports?
• Securities and Exchange Commission (SEC)
• Public Company Accounting Oversight Board (PCAOB)
• Financial Accounting Standards Board (FASB)
• 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
ThinkingAICPA: FN
Reporting
• 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:
• Stock acquisition
• Leveraged buyout
• Statutory Merger
• 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
ThinkingAICPA: FN
Decision Making
• In which of the following situations do accounting standards not require
that the financialstatements of the parent and subsidiary be consolidated?
• A corporation creates a new 100 percent owned subsidiary
• A corporation purchases 90 percent of the voting stock of another company
• A corporation has both control and majority ownership of an unincorporated
company
, • 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
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.
• Based on the information provided, at the time of the transfer, Regan Company
should record:
• Building at $180,000 and no accumulated depreciation.
• Building at $162,000 and no accumulated depreciation.
• Building at $200,000 and accumulated depreciation of $24,000.
• 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
Advanced Financial Accounting 13th
Edition
By Theodore Christensen, ALL Chapters
(1 - 20)
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
,TEST BANK FOR
Advanced Financial Accounting 13th Edition By Theodore Christensen
Chapter 1 Intercorporate Acquisitions and Investments in Other Entities
• 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':
• cost to the parent company.
• book value on the parent company's books at the date of transfer.
• fair value at the date of transfer.
• 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
• Given the increased development of complex business structures, which
of the followingregulators is responsible for the continued usefulness of accounting
reports?
• Securities and Exchange Commission (SEC)
• Public Company Accounting Oversight Board (PCAOB)
• Financial Accounting Standards Board (FASB)
• 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
ThinkingAICPA: FN
Reporting
• 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:
• Stock acquisition
• Leveraged buyout
• Statutory Merger
• 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
ThinkingAICPA: FN
Decision Making
• In which of the following situations do accounting standards not require
that the financialstatements of the parent and subsidiary be consolidated?
• A corporation creates a new 100 percent owned subsidiary
• A corporation purchases 90 percent of the voting stock of another company
• A corporation has both control and majority ownership of an unincorporated
company
, • 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
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.
• Based on the information provided, at the time of the transfer, Regan Company
should record:
• Building at $180,000 and no accumulated depreciation.
• Building at $162,000 and no accumulated depreciation.
• Building at $200,000 and accumulated depreciation of $24,000.
• 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
