Test Bank for Advanced Financial Accounting 13th Edition By Theodore Christensen

Solutions Test Bank for Advanced Financial Accounting 13th Edition By Theodore Christense n 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 exchange d 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 expansi on, 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 i ncreased 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) Fi nancial 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 Learni ng 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 req uire 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, Devo n 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. 5) Based on the information provided, at the time of the transfer, Regan Company should record: A) Building at $180,000 and no accumulated depreciation. B) Building at $162,000 and no accumulated depreciation. C) Building at $200,000 and accumulated depreciation of $24,000. D) 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 Ma ke calculations and prepare journal entries for the creation of a business entity. Bloom's: Understand AACSB: Analytical Thinking AICPA: FN Measurement 6) Based on the information provided, what amount would be reported by Devon Company as investment i n Regan Company common stock? A) $312,000 B) $180,000 C) $330,000 D) $150,000 Answer: A Difficulty: 2 Medium Topic: Accounting for Internal Expansion: Creating Business Entities; The Development of Accounting for Business Combinations Learning Objective: 01 -03 Make calculations and prepare journal entries for the creation of a business entity.; 01 -02 Understand the development of standards related to acquisition accounting over time. Bloom's: Understand AACSB: Analytical Thinking AICPA: FN M easurement 7) Based on the preceding information, Regan Company will report A) additional paid -in capital of $0. B) additional paid -in capital of $150,000. C) additional paid -in capital of $162,000. D) additional paid -in capital of $180,000. Answer: C Difficulty: 2 Medium Topic: Accounting for Internal Expansion: Creating Business Entities Learning Objective: 01 -03 Make calculations and prepare journal entries for the creation of a business entity. Bloom's: Understand AACSB: Analytical Thinking AICPA: FN Measurement At its inception, Peacock Company purchased land for $50,000 and a building for $220,000. After exactly 4 years, it transferred these assets and cash of $75,000 to a newly created subsidiary, Selvick Company, in exchange for 25,000 shares of Selvick's $5 par value stock. Peacock uses straight -line depreciation. When purchased, the building had a useful life of 20 years with no expected salvage value. An appraisal at the time of the transfer revealed that the building has a fair value of $250,000. 8) Based on the information provided, at the time of the transfer, Selvick Company should record A) the building at $220,000 and accumulated depreciation of $44,000. B) the building at $220,000 with no accumulated depreciation. C) the building at $176,000 with no accumulated depreciation. D) the building at $250,000 with no accumulated depreciation. Answer: A 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 Thinking AICPA: FN Measurement 9) Based on the information provided, what amount would be reported by Peacock Company as investment in Selvick Company common stock? A) $125,000 B) $250,000 C) $301,000 D) $345,000 Answer: C Difficulty: 2 Medium Topic: Accounting f or Internal Expansion: Creating Business Entities; The Development of Accounting for Business Combinations Learning Objective: 01 -03 Make calculations and prepare journal entries for the creation of a business entity.; 01 -02 Understand the development of standards related to acquisition accounting over time. Bloom's: Understand AACSB: Analytical Thinking AICPA: FN Measurement 10) Based on the preceding information, Selvick Company will report additional paid -in capital of A) $125,000. B) $176,000. C) $220,000. D) $250,000. Answer: B Difficulty: 2 Medium Topic: Accounting for Internal Expansion: Creating Business Entities Learning Objective: 01 -03 Make calculations and prepare journal entries for the creation of a business entity. Bloom's: Understand AACSB: Analytical Thinking AICPA: FN Measurement 11) Which of the following situations best describes a business combination to be accounted for as a statutory merger? A) Both companies in a combination continue to operate as separate, but re lated, legal entities.