Advanced Accounting 12th Edition Paul M Fischer
William J Taylor Rita H Cheng - Test Bank Chapter
(1 to 21, Module, Special Appendix 1&2)
,Content: _
Chapter 01—Business Combinations: New Rules for a Long-Standing
Business Practice
Chapter 02—Consolidated Statements: Date of Acquisition
Chapter 03—Consolidated Statements: Subsequent to Acquisition
Chapter 04—Intercompany Transactions: Merchandise, Plant Assets, and
Notes
Chapter 05—Intercompany Transactions: Bonds and Leases
Chapter 06—Cash Flow, EPS, and Taxation
Chapter 07—Special Issues in Accounting for an Investment in a Subsidiary
Chapter 08—Subsidiary Equity Transactions, Indirect Subsidiary Ownership,
and Subsidiary Ownership of Parent Shares
Chapter 09—The International Accounting Environment
Chapter 10—Foreign Currency Transactions
Chapter 11—Translation of Foreign Financial Statements
Chapter 12—Interim Reporting and Disclosures about Segments of an
Enterprise
Chapter 13—Partnerships: Characteristics, Formation, and Accounting for
Activities
Chapter 14—Partnerships: Ownership Changes and Liquidations
Chapter 15—Government and Not For Profit Accounting
Chapter 16—Governmental Accounting: Other Governmental Funds,
Proprietary Funds, and Fiduciary Funds
Chapter 17—Financial Reporting Issues
Chapter 18—Accounting for Private Not-for-Profit Organizations
Chapter 19—Accounting for Not-for-Profit Colleges and Universities and
Health Care Organizations
Chapter 20—Estates and Trusts: Their Nature and the Accountant's Role
Chapter 21—Debt Restructuring, Corporate Reorganizations, and
Liquidations
Module—Derivatives and Related Accounting Issues
Special Appendix 1—Equity Method for Unconsolidated Investments
Special Appendix 2 - Variable Interest Entities
,Chapter 01—Business Combinations: New Rules for a Long-Standing
Business Practice
Multiple Choice
1. An economic advantage of a business combination includes:
a. Utilizing duplicative assets.
b. Creating separate management teams.
c. Shared fixed costs.
d. Horizontally combining levels within the marketing chain.
ANSWER: c
RATIONALE: Business combinations may viewed as a way to take advantage of economies
of scale by 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:
a. market extension merger.
b. conglomerate merger.
c. product extension merger.
d. horizontal merger.
ANSWER: d
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:
a. market extension merger.
b. conglomerate merger.
c. product extension merger.
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.
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:
a. market extension merger.
b. conglomerate merger.
c. product extension merger.
d. horizontal merger.
ANSWER: b
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."
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.
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 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
6. A controlling interest in a company implies that the parent company
a. owns all of the subsidiary's stock.
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
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
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.
b. The legal liability of each corporation is limited to its own assets.
William J Taylor Rita H Cheng - Test Bank Chapter
(1 to 21, Module, Special Appendix 1&2)
,Content: _
Chapter 01—Business Combinations: New Rules for a Long-Standing
Business Practice
Chapter 02—Consolidated Statements: Date of Acquisition
Chapter 03—Consolidated Statements: Subsequent to Acquisition
Chapter 04—Intercompany Transactions: Merchandise, Plant Assets, and
Notes
Chapter 05—Intercompany Transactions: Bonds and Leases
Chapter 06—Cash Flow, EPS, and Taxation
Chapter 07—Special Issues in Accounting for an Investment in a Subsidiary
Chapter 08—Subsidiary Equity Transactions, Indirect Subsidiary Ownership,
and Subsidiary Ownership of Parent Shares
Chapter 09—The International Accounting Environment
Chapter 10—Foreign Currency Transactions
Chapter 11—Translation of Foreign Financial Statements
Chapter 12—Interim Reporting and Disclosures about Segments of an
Enterprise
Chapter 13—Partnerships: Characteristics, Formation, and Accounting for
Activities
Chapter 14—Partnerships: Ownership Changes and Liquidations
Chapter 15—Government and Not For Profit Accounting
Chapter 16—Governmental Accounting: Other Governmental Funds,
Proprietary Funds, and Fiduciary Funds
Chapter 17—Financial Reporting Issues
Chapter 18—Accounting for Private Not-for-Profit Organizations
Chapter 19—Accounting for Not-for-Profit Colleges and Universities and
Health Care Organizations
Chapter 20—Estates and Trusts: Their Nature and the Accountant's Role
Chapter 21—Debt Restructuring, Corporate Reorganizations, and
Liquidations
Module—Derivatives and Related Accounting Issues
Special Appendix 1—Equity Method for Unconsolidated Investments
Special Appendix 2 - Variable Interest Entities
,Chapter 01—Business Combinations: New Rules for a Long-Standing
Business Practice
Multiple Choice
1. An economic advantage of a business combination includes:
a. Utilizing duplicative assets.
b. Creating separate management teams.
c. Shared fixed costs.
d. Horizontally combining levels within the marketing chain.
ANSWER: c
RATIONALE: Business combinations may viewed as a way to take advantage of economies
of scale by 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:
a. market extension merger.
b. conglomerate merger.
c. product extension merger.
d. horizontal merger.
ANSWER: d
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:
a. market extension merger.
b. conglomerate merger.
c. product extension merger.
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.
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:
a. market extension merger.
b. conglomerate merger.
c. product extension merger.
d. horizontal merger.
ANSWER: b
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."
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.
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 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
6. A controlling interest in a company implies that the parent company
a. owns all of the subsidiary's stock.
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
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
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.
b. The legal liability of each corporation is limited to its own assets.
