29 Jun 7. Based on the preceding information, what amount
Question
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.
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 above
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
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
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:
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5. 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
6. 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
7. Based on the preceding information, what amount did Conservative report as its investment in Spin after the transfer of assets and liabilities?
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