Chapter 1, Problem 1.1.4E

Multiple-Choice Questions on Complex Organizations
Select the correct answer for each of the following questions.
4. When an existing company creates a new subsidiary and transfers a portion of its assets andliabilities to the new entity
a. The new entity records both the assets and liabilities it received at fair values.
b. The new entity records both the assets and liabilities it received at the carrying values of theoriginal company.
c. The original company records a gain or loss on the difference between its carrying valuesand the fair values of the assets transferred to the new entity.
d. The original company records the difference between the carrying values and the fair valuesof the assets transferred Lo the new entity as goodwill.