Chapter 1
Intercorporate Acquisitions and Investments in Other Entities
Multiple Choice Questions
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
Learning Objective: 01-01
Learning Objective: 01-04
Topic: Internal Expansion: Creating a Business Entity
Topic: Valuation of Business Entities
Blooms: Remember
AACSB: Reflective Thinking
AICPA: FN Decision Making
Difficulty: 1 Easy
,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 above
Answer: D
Learning Objective: 01-01
Topic: An Introduction to Complex Business Structures
Blooms: Remember
AACASB: Reflective Thinking
AICPA: FN Reporting
Difficulty: 1 Easy
,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
Learning Objective: 01-01
Topic: Organizational Structure and Financial Reporting
Blooms: Remember
AACASB: Reflective Thinking
AICPA: FN Decision Making
Difficulty: 1 Easy
, 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
Learning Objective: 01-01
Topic: Organizational Structure and Financial Reporting
Blooms: Remember
AACASB: Reflective Thinking
AICPA: FN Decision Making
Difficulty: 1 Easy
Intercorporate Acquisitions and Investments in Other Entities
Multiple Choice Questions
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
Learning Objective: 01-01
Learning Objective: 01-04
Topic: Internal Expansion: Creating a Business Entity
Topic: Valuation of Business Entities
Blooms: Remember
AACSB: Reflective Thinking
AICPA: FN Decision Making
Difficulty: 1 Easy
,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 above
Answer: D
Learning Objective: 01-01
Topic: An Introduction to Complex Business Structures
Blooms: Remember
AACASB: Reflective Thinking
AICPA: FN Reporting
Difficulty: 1 Easy
,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
Learning Objective: 01-01
Topic: Organizational Structure and Financial Reporting
Blooms: Remember
AACASB: Reflective Thinking
AICPA: FN Decision Making
Difficulty: 1 Easy
, 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
Learning Objective: 01-01
Topic: Organizational Structure and Financial Reporting
Blooms: Remember
AACASB: Reflective Thinking
AICPA: FN Decision Making
Difficulty: 1 Easy
