Baker Test Bank

6049 Words Jun 6th, 2013 25 Pages
Chapter 01 - Intercorporate Acquisitions and Investments in Other Entities

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
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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:

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

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Chapter 01 - Intercorporate Acquisitions and Investments in Other Entities

13. Based on the information provided, what amount will be reported for Common Stock in the combined company's balance sheet immediately following the business combination? A. $200,000 B. $250,000 C. $300,000 D. $210,000

14. Based on the information provided, what amount will be reported for Additional Paid-In Capital in the combined company's balance sheet immediately following the business combination? A. $60,000 B. $80,000 C. $310,000 D. $290,000

15. Based on the information provided, what amount of goodwill will be reported immediately following the business combination in the combined company's balance sheet? A. $0 B. $50,000 C. $40,000 D. $105,000

16. Based on the

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