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SOLUTIONS MANUAL for Advanced Financial Accounting, 13th Edition. By Theodore Christensen, David Cottrell and Cassy Budd Test Bank _ Complete A+$17.49
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SOLUTIONS MANUAL for Advanced Financial Accounting, 13th Edition. By Theodore Christensen, David
Cottrell and Cassy Budd
Test Bank
th
Advance Financial Accounting 13 Edition by Theodore
Chapter 01
Intercorporate Acquisitions and Investments in Other Entities
Multiple Choice Questions
In order to reduce the risk associated with a new line of business, Conservative Corporation
established Spin Company as a wholly owned subsidiary. It transferred assets and accounts
payable to Spin in exchange for its common stock. Spin recorded the following entry when
the transaction occurred:
1. Based on the preceding information, what number of shares of $7 par value stock did Spin
issue to Conservative?
A. 10,000
B. 7,000
C. 8,000
D. 25,000
2. Based on the preceding information, what was Conservative's book value of assets
transferred to Spin Company?
A. $243,000
B. $263,000
C. $221,000
D. $201,000
Test Bank Page 1
, SOLUTIONS MANUAL for Advanced Financial Accounting, 13th Edition. By Theodore Christensen, David
Cottrell and Cassy Budd
3. Based on the preceding information, what amount did Conservative report as its investment
in Spin after the transfer of assets and liabilities?
A. $181,000
B. $221,000
C. $263,000
D. $243,000
4. Based on the preceding information, immediately after the transfer,
A. Conservative's total assets decreased by $23,000.
B. Conservative's total assets decreased by $20,000.
C. Conservative's total assets increased by $56,000.
D. Conservative's total assets remained the same.
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 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.
6. Based on the information provided, what amount would be reported by Devon Company as
investment in Regan Company common stock?
A. $312,000
B. $180,000
C. $330,000
D. $150,000
Test Bank Page 2
, SOLUTIONS MANUAL for Advanced Financial Accounting, 13th Edition. By Theodore Christensen, David
Cottrell and Cassy Budd
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.
8. Burrough Corporation concluded that the fair value of Helyar Company was $80,000 and
paid that amount to acquire all of its net assets. Helyar reported assets with a book value of
$60,000 and fair value of $98,000 and liabilities with a book value and fair value of $23,000
on the date of combination. Burrough also paid $3,000 to a search firm for finder's fees
related to the acquisition. What amount will be recorded as goodwill by Burrough
Corporation while recording its investment in Helyar?
A. $0
B. $5,000
C. $8,000
D. $13,000
Plummet Corporation reported the book value of its net assets at $400,000 when Zenith
Corporation acquired 100 percent ownership. The fair value of Plummet's net assets was
determined to be $510,000 on that date.
9. Based on the preceding information, what amount of goodwill will be reported in
consolidated financial statements presented immediately following the combination
if Zenith paid $550,000 for the acquisition?
A. $0
B. $50,000
C. $150,000
D. $40,000
10. Based on the preceding information, what amount will be recorded by Zenith as its
investment in Plummet, if it paid $500,000 for the acquisition?
A. $610,000
B. $400,000
C. $500,000
D. $510,000
Test Bank Page 3
, SOLUTIONS MANUAL for Advanced Financial Accounting, 13th Edition. By Theodore Christensen, David
Cottrell and Cassy Budd
11. Based on the preceding information, what amount of goodwill will be reported in
consolidated financial statements presented immediately following the combination
if Zenith paid $500,000 for the acquisition?
A. $0
B. $50,000
C. $150,000
D. $40,000
Octane Company and Bio Company have announced terms of an exchange agreement under
which Octane will issue 10,000 shares of its $5 par value common stock to acquire all of Bio's
assets. Octane shares are trading at $28, and Bio's $10 par value shares are trading at $15.
Historical cost and fair value balance sheet data on January 1, 2008, are as follows:
CPA
12. Based on the information provided, what amount will be reported immediately following
the business combination for Buildings and Equipment (net) in the combined company's
balance sheet?
A. $300,000
B. $370,000
C. $330,000
D. $340,000
Test Bank Page 4
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