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Test bank For Advanced Accounting Exam 1 MC Review 15th Edition by Joe Ben Hoyle
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Test bank For Advanced AccountingExam 1 MC Review 15th Edition by Joe
Ben Hoyle
A parent-subsidiary relationship may be distinguished from a merger by:
a. the number of affiliates joining.
b. the resulting legal entity or entities.
c. the price paid for the subsidiary.
d. whether the affiliation was accomplished with a cash payment or stock transaction. - ANSB
Which of the following best describes the SEC's definition of a totally held company?
a. At least 50 percent of the stock of the subsidiary is owned by the parent.
b. No more than 90 percent of the stock is owned by the parent.
c. The parent owns 100 percent of the subsidiary.
d. The parent owns or controls substantially all of the subsidiary's stock. - ANSD
What are consolidated financial statements?
a. Statements which show the combined assets, liabilities, revenues and expenses of a parent
and its subsidiaries
b. Statements which are constructed by the parent company
c. Statements which are prepared from no books, but from a workpaper
d. All of these. - ANSD
Which of the following is NOT a reason for a parent-subsidiary relationship?
a. It is easier to establish a parent-subsidiary relationship than a merger.
b. The parent has limited responsibility for the liabilities of the subsidiary.
c. The relationship is permanent - the parent can never sell its interest in the subsidiary.
d. The parent can establish a controlling interest with a smaller investment. - ANSC
The argument of substance over form asserts that:
a. in form the companies are a single entity but in substance they are separate entities.
b. in form the companies are separate legal entities but in substance they are a single entity.
c. in form and substance the companies are separate legal entities.
d. in form and substance the companies are a single entity. - ANSB
How does P record its investment in S?
a. At the fair market value of the assets received.
b. At the fair market value of the assets given up.
c. At the book value of the assets received.
, d. At the book value of the assets given up. - ANSB
Why does the parent company use a worksheet in the preparation of consolidated financial
statements?
a. Because there are no consolidated journals and ledgers.
b. Because certain intercompany transactions must be eliminated.
c. Because there might be a difference between the value implied by the purchase price and
the value of the net assets.
d. All of these - ANSD
The difference between value implied by the purchase price and book value results when the:
a. book value of the net assets acquired is different from the fair value of the identifiable assets
acquired.
b. fair value of the net assets acquired is different from the fair value of the net assets used .
c. book value of the net assets acquired is different from the fair value of the consideration paid.
d. book value of the net assets acquired is different from the book value of the assets used. -
ANSC
What is the noncontrolling interest?
a. The interest of the parent company if that company owns less than 100 percent of the
subsidiary.
b. The interest of the other stockholders of the subsidiary company which appears on the
consolidated statements.
c. The equity of a subsidiary company which is in legal reorganization.
d. The difference between the P's investment account and the book value of the S's net assets.
- ANSB
An elimination entry:
a. allows the consolidated entity to remove assets and liabilities that would be double counted
when the assets and liabilities of the parent company and subsidiary company are added
together.
b. appears only on the workpaper.
c. helps support the substance over form argument.
d. all of these. - ANSD
What is the effect of S's treasury stock on the consolidated statements?
a. The treasury stock is included as a deduction from total equity.
b. The treasury stock is included as a liability.
c. The treasury stock is eliminated in the entry to offset P's investment against its share of S's
equity.
d. P cannot create a parent-subsidiary relationship if S has treasury stock. - ANSC
P Company has loaned $10,000 to S Company. P recorded the transfer in its books, but S has
not yet recorded the receipt of cash. On the workpaper, the proper entry would be to:
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