Advanced Financial Accounting 8th Edition by Baker – Test Bank
ISBN-13: 978-0073526911 ISBN-10: 9780073526911
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:
- Based on the preceding information, what number of shares of $7 par value stock did Spin issue to Conservative?
- 10,000 B. 7,000 C. 8,000 D. 25,000
- Based on the preceding information, what was Conservative’s book value of assets transferred to Spin Company?
- $243,000 B. $263,000 C. $221,000 D. $201,000
Chapter 01 – Intercorporate Acquisitions and Investments in Other Entities
- Based on the preceding information, what amount did Conservative report as its investment in Spin after the transfer of assets and liabilities?
- $181,000 B. $221,000 C. $263,000 D. $243,000
- Based on the preceding information, immediately after the transfer,
- Conservative’s total assets decreased by $23,000.
- Conservative’s total assets decreased by $20,000.
- Conservative’s total assets increased by $56,000.
- 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.
- Based on the information provided, at the time of the transfer, Regan Company should record:
- Building at $180,000 and no accumulated depreciation. B. Building at $162,000 and no accumulated depreciation.
- Building at $200,000 and accumulated depreciation of $24,000. D. Building at $180,000 and accumulated depreciation of $18,000.
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