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
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
