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, assetstransferred 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 oftransfer.
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 ofthe 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 ofthe 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) StatutoryMerger
D) Reverse statutory rollup