Partnership Accounting
Exam Answer Key
Course Introduction
Partnership Accounting focuses on the principles and procedures associated with the financial activities of partnerships as opposed to sole proprietorships or corporations. The course covers the formation and dissolution of partnerships, accounting for the admission and retirement of partners, profit and loss distribution, revaluation of assets and liabilities, and changes in partnership capital structures. Emphasis is placed on the preparation of partnership financial statements, treatment of goodwill, and application of generally accepted accounting principles (GAAP) relevant to partnerships. Through theoretical concepts and practical exercises, students gain a comprehensive understanding of how partnerships are formed, operated, and liquidated from an accounting perspective.
Recommended Textbook
Advanced Accounting 13th Edition By
Joe Ben Hoyle
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Page 2
Chapter 1: The Equity Method of Accounting for Investments
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Q1) After allocating cost in excess of book value, which asset or liability would not be amortized over a useful life?
A) Cost of goods sold.
B) Property, plant, & equipment.
C) Patents.
D) Goodwill.
E) Bonds payable.
Answer: D
Q2) What is the amount of excess amortization expense for Bailey's investment in Emery for the first year?
A) $ 0.
B) $ 84,000.
C) $100,000.
D) $160,000.
E) $400,000.
Answer: B
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Chapter 1: A: the Equity Method of Accounting for Investments
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Q1) Pursley, Inc.acquires 10% of Ritz Corporation on January 3, 2017, for $80,000 when the book value of Ritz was $800,000.Pursley adjusted the investment to its fair value of $162,500 at December 31, 2017.During 2017 Ritz reported net income of $125,000 and paid dividends of $30,000.On January 10, 2018, Pursley purchased an additional 20% of Ritz for $325,000, giving Pursley the ability to significantly influence the operating policies of Ritz.Any excess of cost over book value is attributable to goodwill with an indefinite life.What journal entry(ies) is(are) required on January 1, 2018?
Answer: 11ea7e46_dcef_92fa_ab1f_4d13e3b32479_TB2563_00 Additionally, if the fair value of the original 10% shares differed on January 10, 2018, than it did on December 31, 2017, Pursley would record the adjustment to the investment account so that the proper allocation of excess payment to goodwill could be prepared when the ownership percentage required use of the equity method of accounting on January 10, 2018.
Q2) What argument could be made against the equity method?
Answer: An argument could be made against the recognition of income under the equity method. The investor is required to recognize its share of the investee's income even when it is unlikely that the investor will ever receive the entire amount in cash dividends.
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4
Chapter 2: Consolidation of Financial Information
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Q1) Assume that Botkins acquired Volkerson on January 1, 2017.Immediately afterwards, what is the value of the consolidated Common Stock?
A) $456,000.
B) $402,000.
C) $274,000.
D) $276,000.
E) $330,000.
Answer: D
Q2) Assuming that Corr retains a separate corporate existence after this acquisition, at what amount is the investment recorded on Goodwin's books?
A) $1,540.
B) $1,800.
C) $1,860.
D) $1,825.
E) $1,625.
Answer: B
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Chapter 2: A: Consolidation of Financial Information
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Q1) Compute the amount of consolidated common stock at date of acquisition.
A) $370.
B) $570.
C) $610.
D) $330.
E) $530.
Q2) In a business combination where a subsidiary retains its incorporation and which is accounted for under the acquisition method, how should stock issuance costs and direct combination costs be treated?
A) Stock issuance costs and direct combination costs are expensed as incurred.
B) Direct combination costs are ignored, and the stock issuance costs result in a reduction to additional paid-in capital.
C) Direct combination costs are expensed as incurred and stock issuance costs result in a reduction to additional paid-in capital.
D) Both are treated as part of the acquisition consideration transferred.
E) Both reduce additional paid-in capital.
Q3) How are bargain purchases accounted for in an acquisition business transaction?
Q4) How is contingent consideration accounted for in an acquisition business combination transaction?
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Chapter 3: Consolidations - Subsequent to the Date of Acquisition
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Q1) Compute the December 31, 2020, consolidated common stock.
A) $450,000.
B) $530,000.
C) $555,000.
D) $635,000.
E) $525,000.
Q2) Under the initial value method, when accounting for an investment in a subsidiary,
A) Dividends received by the subsidiary decrease the investment account.
B) The investment account is adjusted to fair value at year-end.
C) Income reported by the subsidiary increases the investment account.
D) The investment account does not change from year to year.
E) Dividends received are ignored.
Q3) Which of the following is not an example of an intangible asset?
A) Customer list
B) Database
C) Lease agreement
D) Broken equipment
E) Trademark
Q4) What was consolidated equipment as of December 31, 2018?
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Chapter 3: A: Consolidations - Subsequent to
the Date of Acquisition
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Q1) How is the goodwill impairment process simplified for private companies?
Q2) Parrett Corp.acquired one hundred percent of Jones Inc.on January 1, 2016, at a price in excess of the subsidiary's fair value.On that date, Parrett's equipment (ten-year life) had a book value of $360,000 but a fair value of $480,000.Jones had equipment (ten-year life) with a book value of $240,000 and a fair value of $350,000.Parrett used the partial equity method to record its investment in Jones.On December 31, 2018, Parrett had equipment with a book value of $250,000 and a fair value of $400,000.Jones had equipment with a book value of $170,000 and a fair value of $320,000.What is the consolidated balance for the Equipment account as of December 31, 2018?
A) $387,000.
B) $497,000.
C) $508.000.
D) $537,000.
E) $570,000.
Q3) Determine the amortization expense related to the combination at the year-end date of 12/31/16.
Q4) Compare the differences in accounting treatment for goodwill between U.S.GAAP and IFRS.
Q5) What is the basic objective of all consolidations?
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Chapter 4: Consolidated Financial Statements and Outside Ownership
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Q1) Compute the noncontrolling interest in the net income of Demers at December 31, 2019.
A) $20,000.
B) $12,000.
C) $18,600.
D) $10,600.
E) $14,400.
Q2) In consolidation at December 31, 2020, what adjustment is necessary for Hogan's Equipment account?
A) $2,000 increase.
B) $2,000 decrease.
C) $1,800 increase.
D) $1,800 decrease.
E) No adjustment is necessary.
Q3) Compute Pell's investment in Demers at December 31, 2019.
A) $625,000.
B) $574,400.
C) $548,000.
D) $542,400.
E) $532,000.
Page 9
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Chapter 4: A: Consolidated Financial Statements and Outside Ownership
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Q1) What is the amount of Kailey's net income to the controlling interest for 2019?
A) $31,000.
B) $33,000.
C) $55,000.
D) $60,000.
E) $39,000.
Q2) Compute the noncontrolling interest in the net income of Demers at December 31, 2019.
A) $20,000.
B) $12,000.
C) $18,600.
D) $10,600.
E) $14,400.
Q3) In consolidation at December 31, 2019, what adjustment is necessary for Hogan's Land account?
A) $8,000 decrease .
B) $7,000 increase.
C) $6,300 increase.
D) $6,300 decrease.
E) No adjustment is necessary.
Page 10
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Chapter 5: Consolidated Financial Statements Intra-Entity
Asset Transactions
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Q1) Assuming there are no excess amortizations or other intra-entity transactions, compute income from Stiller on Leo's books for 2017.
A) $110,000
B) $100,000.
C) $125,000.
D) $ 85,000.
E) $ 88,000.
Q2) An intra-entity transfer took place whereby the book value exceeded the transfer price of a depreciable asset.Which statement is true for the year after the year of transfer?
A) A worksheet entry is made with a debit to retained earnings for an upstream transfer. B) A worksheet entry is made with a credit to retained earnings for an upstream transfer.
C) A worksheet entry is made with a debit to retained earnings for a downstream transfer.
D) A worksheet entry is made with a debit to investment in subsidiary for a downstream transfer.
E) No worksheet entry is necessary.
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Chapter 5: A: Consolidated Financial Statements
Intra-Entity Asset Transactions
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Q1) In the consolidation worksheet for 2018, assuming Carter uses the initial value method of accounting for its investment in Strickland, which of the following accounts would be credited to defer recognition of intra-entity gross profit with regard to the 2017 intra-entity transfers?
A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Strickland Company.
E) Sales.
Q2) Prepare the consolidation entries that should be made at the end of 2017.
Q3) In the consolidation worksheet for 2017, which of the following accounts would be debited to eliminate unrecognized intra-entity gross profit with regard to the 2017 intra-entity transfers?
A) Retained earnings.
B) Cost of goods sold.
C) Inventory.
D) Investment in Fisher Company.
E) Sales.
Q4) How is the gain on an intra-entity transfer of a depreciable asset recognized?
Q5) What is consolidated net income for 2018?
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Chapter 6: Variable Interest Entities, Intra-Entity Debt,
Consolidated Cash Flows, and Other Issues
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Q1) Parent Corporation loaned money to its subsidiary with a five-year note at the market interest rate.How would the note be accounted for in the consolidation process?
Q2) Which one of the following characteristics of preferred stock would make the stock a dilutive security for purposes of calculating earnings per share?
A) The preferred stock is callable.
B) The preferred stock is convertible.
C) The preferred stock is cumulative.
D) The preferred stock is noncumulative.
E) The preferred stock is participating.
Q3) Prepare all consolidation entries for 2018.
Q4) What should the adjusted book value of Chase be after the treasury shares were purchased?
A) $400,000.
B) $480,000.
C) $320,000.
D) $336,000.
E) $464,000.
Q5) Prepare Panton's journal entry to recognize the impact of this transaction.
Page 13
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Chapter 6: A: Variable Interest Entities, Intra-Entity Debt,
Consolidated Cash Flows, and Other Issues
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Q1) Parent Corporation had just purchased some of its subsidiary's outstanding bonds on the open market.What items related to these bonds will have to be accounted for in the consolidation process?
Q2) Danbers Co.owned seventy-five percent of the common stock of Renz Corp.How does the issuance of a five percent stock dividend by Renz affect Danbers and the consolidation process?
Q3) What would Knight Co.report as consolidated diluted earnings per share (rounded)?
A) $4.00.
B) $. 4.71
C) $8.71.
D) $5.89.
E) $6.37.
Q4) Which of the following statements is false concerning variable interest entities (VIEs)?
A) Sometimes VIEs do not have independent management.
B) Most VIEs are established for valid business purposes.
C) VIEs may be formed as a source of low-cost financing.
D) VIEs have little need for voting stock.
E) A VIE cannot take the legal form of a partnership or corporation.
Page 14
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Chapter 7: Consolidated Financial Statements - Ownership
Patterns and Income Taxes
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Q1) What is Beta's accrual-based net income for 2018?
A) $200,000.
B) $276,800.
C) $280,000.
D) $296,000.
E) $300,000.
Q2) Pear, Inc.owns 80 percent of Apple Corporation.During the current year, Apple reported operating income before tax of $400,000 and paid a dividend of $120,000.The income tax rate for each company is 40 percent and separate tax returns are prepared.What deferred income tax liability arising this year must be recognized in the consolidated balance sheet?
A) $ 0.
B) $ 7,680.
C) $17,920.
D) $38,400.
E) $51,200.
Q3) Required:
Prepare a schedule to show consolidated net income.
Q4) What method is used in consolidation to account for a subsidiary's ownership of shares of its parent corporation?
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Chapter 7: A: Consolidated Financial Statements -
Ownership Patterns and Income Taxes
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Q1) Assuming that separate income tax returns are being filed, what deferred income tax asset is created?
A) $ 0.
B) $1,100.
C) $1,800.
D) $6,000.
E) $9,000.
Q2) How is goodwill amortized?
A) It is not amortized for reporting purposes or for tax purposes.
B) It is not amortized for reporting purposes, but is amortized over a 5-year life for tax purposes.
C) It is not amortized for tax purposes, but is amortized over a 5-year life for reporting purposes.
D) It is not amortized for tax purposes, but is amortized over a 15-year life for reporting purposes.
E) It is not amortized for reporting purposes, but is amortized over a 15-year life for tax purposes.
Q3) How is the amortization of goodwill treated for income tax purposes? How does the amortization of goodwill affect deferred income taxes?
Page 16
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Chapter 8: Segment and Interim Reporting
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Q1) Which items of information are required to be included in interim reports for each operating segment?
Q2) List the five aggregation criteria that need to be considered by management in determining whether business activities and environments are similar.
Q3) How should revenues be recognized in interim periods?
A) In the same way as they are recognized on an annual basis.
B) On the cash basis.
C) On an annualized basis.
D) On a seasonal basis.
E) There are no revenues recognized in interim periods.
Q4) The following items are required to be disclosed for each operating segment except:
A) Factors used to allocate company-wide pension expense.
B) Revenues from transactions with other operating segments.
C) Interest revenue and interest expense.
D) Depreciation, depletion, and amortization expense.
E) Revenues from external customers.
Q5) According to U.S.GAAP, how should general corporate costs be allocated to individual segments to determine segment profit or loss?
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Chapter 8: A: Segment and Interim Reporting
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Q1) Which of the following is false with regard to accounting standards for segment reporting according to International Financial Reporting Standards (IFRS) and U.S.GAAP?
A) IFRS and U.S. GAAP do not each require disclosure of segment liabilities.
B) IFRS and U.S. GAAP both require disclosure of intangible assets attributable to geographic segments.
C) According to IFRS, operating segments can be based on products and services.
D) According to IFRS, operating segments can be based on geographic areas.
E) IFRS and U.S. GAAP both require disclosure of total assets.
Q2) Which of the segments are separately reportable?
A) DVDs only.
B) DVDs and MP3s.
C) DVDs and VCRs.
D) VCRs and MP3s.
E) DVDs, VCRs, and MP3s.
Q3) How does a company measure income tax expense to be reported in an interim period?
Q4) What two disclosure guidelines for operating segment information are designed to ensure the consistency of data reported from year to year?
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Page 18
Chapter 9: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Q1) Assuming a forward contract was entered into, the foreign currency was originally sold in the foreign currency market on December 16, 2018 at a
A) Forward contract discount $ 600.
B) Forward contract premium $ 600.
C) Forward contract discount $ 980.
D) Forward discount premium $ 980.
E) There is no premium or discount because the fair value of the contract is zero.
Q2) What was the overall result of having entered into this hedge of exposure to foreign exchange risk?
A) $0
B) $9,000 net loss on the option.
C) $9,000 net gain on the option.
D) $2,000 net gain on the option.
E) $2,000 net loss.
Q3) What happens when a U.S.company purchases goods denominated in a foreign currency and the foreign currency appreciates?
Q4) What happens when a U.S.company sells goods denominated in a foreign currency and the foreign currency depreciates?
Page 19
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Chapter 9: A: Foreign Currency Transactions and Hedging
Foreign Exchange Risk
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Q1) How much foreign exchange gain or loss should be included in Shannon's 2018 income statement?
A) $1,000 gain.
B) $1,000 loss.
C) $2,000 gain.
D) $2,000 loss.
E) $8,000 loss.
Q2) What is the amount of Adjustment to Accumulated Other Comprehensive Income for 2019 from these transactions?
A) $1,000.
B) $1,600.
C) $1,800.
D) $2,000.
E) $2,600.
Q3) Compute the U.S.dollars received on February 1, 2019.
A) $138,000.
B) $136,500.
C) $145,500.
D) $141,000
E) $142,500.
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Chapter 10: Translation of Foreign Currency Financial Statements
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Q1) What amount would have been reported for this inventory in Porter's consolidated balance sheet at December 31, 2017?
A) $24,000.
B) $26,400.
C) $22,800.
D) $27,600.
E) $28,800.
Q2) In accounting, the term translation refers to
A) The calculation of gains or losses from hedging transactions.
B) The calculation of exchange rate gains or losses on individual transactions in foreign currencies.
C) The procedure required to identify a company's functional currency.
D) The calculation of gains or losses from all transactions for the year.
E) A procedure to prepare a foreign subsidiary's financial statements for consolidation.
Q3) Assume Boerkian was a foreign subsidiary of a U.S.multinational company and the U.S.dollar was the functional currency of the subsidiary.Prepare a schedule of changes in the net monetary assets of Boerkian for the year 2018 and properly label the resulting gain or loss.
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Chapter 10: A: Translation of Foreign Currency Financial Statements
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Q1) Compute the December 31, 2018, inventory balance using the current rate method.
A) $454,400.
B) $457,600.
C) $596,400.
D) $419,000.
E) $321,000.
Q2) Prepare a statement of cash flows for this subsidiary in stickles and then translate the amounts into U.S.dollars.
Q3) Prepare a balance sheet for this subsidiary in stickles and then translate the amounts into U.S.dollars.
Q4) Assume the functional currency is the U.S.Dollar; compute the U.S.balance sheet amount for inventory, at cost, for 2018.
A) $18,800.
B) $19,600.
C) $18,000.
D) $20,200.
E) $19,000.
Q5) Under what circumstances would the remeasurement of a foreign subsidiary's financial statements be required?
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Chapter 11: Worldwide Accounting Diversity and International Accounting Standards
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Q1) Which of the following is not an example of IFRS simplified for SMEs?
A) All borrowing costs are expensed as incurred.
B) All development costs are expensed as incurred.
C) Goodwill is amortized over its useful life.
D) There is a choice between using the cost model and the revaluation model for property, plant, and equipment.
E) Actuarial gains and losses for defined benefit plans are recognized immediately.
Q2) Which of the following is a pronouncement originally issued by the IASC and is not a pronouncement originally issued by the IASB?
A) Business Combinations.
B) First-Time Adoption of IFRS.
C) Financial Instruments: Disclosures.
D) Interim Financial Reporting.
E) Operating Segments.
Q3) With regard to IFRS, what does SME refer to, and what is the significance with regard to financial reporting requirements?
Q4) Why do countries have their own unique set of financial reporting practices?
Q5) What two reconciliations are required by IFRS 1 for first-time IFRS Adopters?
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Chapter 11: A: Worldwide Accounting Diversity and International Accounting Standards
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Q1) What is the IOSCO?
Q2) Which of the following is a correct statement with regard to differences between IFRS and U.S.GAAP?
A) Reporting a bank overdraft that is an integral part of a cash management policy is a recognition difference.
B) Reporting LIFO inventory is a presentation difference.
C) Reporting past service cost for defined benefit pension plans is a measurement difference.
D) Reporting convertible debt is a recognition difference.
E) Reporting development costs is a classification difference.
Q3) In the 2012 Financial Staff Report issued by the SEC, what were some of the unresolved issues identified that prevented the SEC from requiring IFRS usage?
Q4) What are the four different ways IFRS can be used by a country?
Q5) Convergence of accounting standards would not occur by:
A) FASB adopting an existing IASB standard.
B) IASB adopting an existing FASB standard.
C) IASB issuing a new standard.
D) IASB and FASB jointly developing a new standard.
E) IASB and FASB each issuing a similar but not identical standard.
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Chapter 12: Financial Reporting and the Securities and Exchange Commission
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Q1) Name five securities offerings exempt from registration with the SEC.
Q2) How are the operations of the SEC funded?
Q3) What is shelf registration?
Q4) Which one of the following Federal laws was enacted in 1935?
A) The Securities Act.
B) The Securities Exchange Act.
C) The Trust Indenture Act.
D) The Investment Company Act.
E) The Public Utility Holding Company Act.
Q5) Which one of the following forms is used in connection with employee stock plans?
A) S-8.
B) S-3.
C) S-4.
D) S-1.
E) S-11.
Q6) What Federal agency has Congressional authority to amend, modify, repeal, or reject auditing standards?
Q8) Name the two broad categories of filings with the SEC. Page 25
Q7) Why is the SEC's Rule 14c-3 important to the accounting profession?
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Chapter 12: A: Financial Reporting and the Securities and Exchange Commission
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Q1) What is a proxy? Briefly explain the importance of a proxy solicitation and a proxy statement.
Q2) EDGAR stands for:
A) Electronic Debits, Gains, Assets and Revenues System.
B) Electronic Data Gathering, Analysis, and Retrieval System.
C) Explanatory Data Gathering, Analysis, and Retrieval System.
D) Explanatory Debits, Gains, Assets and Revenues System.
E) Electronic Data, Gross Analysis, and Revenues System.
Q3) A wraparound filing:
A) May be used by large companies to sell securities over a period of two years without re-filing with the SEC.
B) Is a simplified registration procedure for securities to be issued by small companies.
C) Allows a company to simplify its periodic filing by attaching its annual report to Form 10-K.
D) Is a filing completed using the SEC's electronic filing system.
E) May remain in effect for a period of one to five years.
Q4) What is required by the Trust Indenture Act of 1939?
Q5) How has the Sarbanes-Oxley Act of 2002 changed the role of the audit committee?
Q6) For what purpose is the SEC's Registration Form S-4 used?
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Chapter 13: Accounting for Legal Reorganizations and Liquidations
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Q1) Which of the following is not one of the more common reorganization plan elements?
A) Plans for plant expansion.
B) Plans for generating additional monetary resources.
C) Plans to settle the debts of the company that existed when the order for relief was entered.
D) Plans proposing changes in the company's operations.
E) Plans for changes in the management of the company.
Q2) Prepare a schedule to show the amount of total payment on notes payable.(Round the payout percentage to one decimal place, for example, .1234 as 12.3 percent.)
Q3) What is the payout percentage to unsecured creditors? (Round the percentage to a whole number and two decimal places.)
Q4) What are possible plans that management of a troubled business might create to mitigate substantial doubt that the entity will fail to make its debt payments within one year from the issuance of financial statements?
Q5) Prepare a schedule to show the amount of assets that are available for unsecured creditors after payment of liabilities with priority.
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Chapter 13: A: Accounting for Legal Reorganizations and Liquidations
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Sample Questions
Q1) What is the payout percentage to unsecured creditors? (Round the percentage to a whole number and two decimal places.)
Q2) What is the difference between a liquidation and a reorganization?
Q3) Prepare a schedule to show the amount of total assets available to pay liabilities with priority and unsecured creditors.
Q4) What information is included on the statement of realization and liquidation?
Q5) Who must accept and confirm the Reorganization plan?
Q6) What are the four categories of debts in a Statement of Financial Affairs?
Q7) What are the three categories of assets in a Statement of Financial Affairs?
Q8) Prepare a schedule to show the amount of assets available for unsecured creditors after payment of liabilities with priority.
Q9) On a statement of financial affairs, a company's assets should be valued at A) Historical cost.
B) Net realizable value, if lower than historical cost.
C) Replacement cost.
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D) Net realizable value, if higher than historical cost.
E) Net realizable value, whether higher or lower than historical cost.
Q10) What are some of the common elements that can be included in a reorganization
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Chapter 14: Partnerships: Formation and Operation
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Sample Questions
Q1) Record the journal entry to allocate the salary of Noris.
Q2) Which of the following could be used as a basis to allocate profits among partners who are active in the management of the partnership? 1) Allocation of salaries.
2) The number of years with the partnership.
3) The amount of time each partner works.
4) The average capital invested.
A) 1 and 2.
B) 1 and 3.
C) 1, 2, and 4.
D) 1, 3, and 4.
E) 1, 2, 3, and 4.
Q3) What was Wasser's capital balance at the end of 2017?
A) $150,000.
B) $160,000.
C) $165,000.
D) $213,000.
E) $201,000.
Q4) Under what circumstances does a partner's balance in his or her capital account have practical consequences for the partner?
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Chapter 14: A: Partnerships: Formation and Operation
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89 Verified Questions
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Sample Questions
Q1) What was Eaton's total share of net income for the second year?
A) $17,160 income.
B) $ 4,160 income.
C) $19,760 income.
D) $17,290 income.
E) $28,080 income.
Q2) Eden contributes $49,000 into the partnership for a 25% interest.The four original partners share profits and losses equally.Using the bonus method, determine the balances for each of the five partners after Eden joins the partnership.
Q3) What was Wasser's capital balance at the end of 2017?
A) $150,000.
B) $160,000.
C) $165,000.
D) $213,000.
E) $201,000.
Q4) Determine the amount of net income allocated to each partner for 2018.(Round all calculations to the nearest whole dollar).
Q5) What events cause the dissolution of a partnership?
Q6) Why are the terms of the Articles of Partnership important to partners?
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Chapter 15: Partnerships: Termination and Liquidation
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Q1) If the noncash assets were sold for $234,000, what amount of the loss would have been allocated to Bartle with respect to the noncash assets?
A) $43,200.
B) $46,800.
C) $40,000.
D) $42,400.
E) $43,100.
Q2) What is the preferred method of resolving a partner's deficit balance, according to the Uniform Partnership Act?
A) Partners never have a deficit balance.
B) The other partners must contribute personal assets to cover the deficit balance.
C) The partnership must sell assets in order to cover the deficit balance.
D) The partner with a deficit balance must contribute personal assets to cover the deficit balance.
E) The partner with a deficit balance contributes personal assets only if those personal assets exceed personal liabilities.
Q3) Record the journal entry for the sale of the noncash assets.
Q4) What is the purpose of a predistribution plan?
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Chapter 15: A: Partnerships: Termination and Liquidation
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69 Verified Questions
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Sample Questions
Q1) What is the purpose of a predistribution plan?
Q2) For what amount would the noncash assets need to be sold in order for Quincy to receive some cash from the liquidation?
A) Any amount in excess of $170,000.
B) Any amount in excess of $190,000.
C) Any amount in excess of $260,000.
D) Any amount in excess of $280,000.
E) Any amount in excess of $300,000.
Q3) For what amount would noncash assets need to be sold to generate enough cash in order that at least one partner would receive some cash upon liquidation?
A) $185,000
B) $170,000
C) $165,000
D) $ 95,000
E) $ 90,000
Q4) Prepare the journal entry for Donald, Chief & Berry LLP on August 1, 2018, to record payment of liabilities.
Q5) Record the journal entry for the cash distribution to the partners.
Q6) Prepare the schedule to compute the cash payments to the partners.
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Chapter 16: Accounting for State and Local Governments,
Part I
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83 Verified Questions
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Sample Questions
Q1) What assets would be included in the accounting records of a city's general fund?
Q2) Trapper City issued 30-year bonds for the purpose of building a new City Hall.The proceeds of the bonds are deposited in the General Fund.For the governmental fund financial statements, in what fund will Bonds Payable appear?
A) General fund.
B) Internal service fund.
C) Permanent fund.
D) Debt service fund.
E) Bonds Payable do not appear in governmental fund financial statements.
Q3) On July 12, 2018, Fred City ordered a new computer at an anticipated cost of $114,400.The computer was received on July 16, 2018 with an actual cost of $116,220.Payment was subsequently made on August 15, 2018.
Required:
(A) Prepare all the required journal entries and identify the type of fund in which each entry was recorded for the governmental fund financial statements.
(B) Prepare all the required journal entries to be recorded for the government-wide financial statements.
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Chapter 16: A: Accounting for State and Local Governments,
Part I
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83 Verified Questions
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Sample Questions
Q1) A city operates a central data processing facility.The expenses of this facility would be accounted for using
A) The general fund.
B) An enterprise fund.
C) A capital projects fund.
D) An agency fund.
E) An internal service fund.
Q2) Shell City makes a transfer of $100,000 from the General fund to the Debt service fund.
Required:
Prepare the required journal entries and identify the funds in which they are recorded.
Q3) The Trumbull County legislature voted to set aside $500,000 to have new street signs produced for county roads..
Required: For governmental fund financial statements, prepare the journal entry for the adjustment to the fund balance of the general fund.
Q4) Under modified accrual accounting, when should revenues be recognized by a governmental-type fund?
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Chapter 17: Accounting for State and Local Governments,
Part II
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42 Verified Questions
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Sample Questions
Q1) What three criteria must be met before a governmental unit can elect to not capitalize and therefore report a work of art or historical treasure as an asset?
Q2) According to the GASB (Governmental Accounting Standards Board), which one of the following is not a criterion for determining whether a government is legally separate?
A) The government can determine its own budget.
B) The government can issue bonded debt.
C) The government has corporate powers including the right to sue and be sued.
D) The government has the power to levy taxes.
E) The government can issue preferred stock.
Q3) On government-wide financial statements, which of the following are the appropriate amounts to present in the financial statements for 2018?
A) Both expense and liability will be zero.
B) Expense will be $300,000 and liability will be $600,000.
C) Expense will be $600,000 and liability will be $600,000.
D) Expense will be $675,000 and liability will be $600,000.
E) Expense will be $375,000 and liability will be $675,000.
Q4) What information is required in the financial section of a state or local government's CAFR?
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Chapter 17: A: Accounting for State and Local Governments,
Part II
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Q1) All of the following about tax abatement agreements must be disclosed by state and local governments except:
A) The purpose of the tax abatement program.
B) The type of tax being abated.
C) Identify the companies receiving the abatements.
D) Dollar amount of taxes abated.
E) Commitments made by the government or other party.
Q2) The modified approach to accounting for infrastructure assets may be utilized by a state or local government if:
A) i and ii.
B) i, ii, and iv.
C) ii and iii.
D) i, ii, and iii.
E) i, ii, iii, and iv.
Q3) Prepare a Statement of Revenues, Expenditures and Other Changes in Fund Balances for the year ended December 31, 2018.
Q4) What information is required in the introductory section of a state or local government's CAFR?
Q5) What is meant by the term legally independent?
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Chapter 18: Accounting for Not-For-Profit Entities
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Sample Questions
Q1) A local social worker, earning $12 per hour working for the state government, contributed 600 hours of time at no charge to the Sunny Homeless Shelter, a voluntary health and welfare entity.If not for these donated services, an additional staff person would have been hired by the entity.
Required:
How should the Sunny Homeless Shelter record the contributed services?
Q2) Which entry would be the correct entry on the not-for-profit entity's books to record a donor's gift when the money is simply passing through the not-for-profit entity, it creates no direct benefit, and control of the assets has been relinquished by the donor?
DEBIT CREDIT
A) Expense-charitable contribution Cash
B) Refundable advance to charity Cash
C) Cash Liability to beneficiary
D) Cash Refundable advance
E) Cash Contribution revenue
Q3) What two classifications are used for the expenses incurred by voluntary health and welfare entities?
Q4) What should Dura Foundation report as program service expenses?
Q5) Prepare the necessary journal entry to record the revenue and receivables.
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Chapter 18: A: Accounting for Not-For-Profit Entities
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72 Verified Questions
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Sample Questions
Q1) Which of the following statements is required for voluntary health and welfare entities, but not for other not-for-profit entities?
A) Statement of Activities and Changes in Net Assets.
B) Statement of Functional Expenses.
C) Statement of Financial Position.
D) Statement of Cash Flows.
E) Statement of Budget to Actual.
Q2) On a Statement of Activities for a not-for-profit entity, what is the minimum required classification for categories of expenses?
A) Fund-raising expenses and operating expenses.
B) Program services expenses and administrative services expenses.
C) Program services expenses and supporting services expenses.
D) Operating expenses and supporting services expenses.
E) Operating expenses and administrative expenses.
Q3) What should Dura Foundation report as supporting service expenses?
Q4) What term is often used by voluntary health and welfare entities as a category for resources received from contributions, as opposed to those from providing goods or services?
Q5) Prepare the necessary journal entry to record the revenue and receivables.
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Chapter 19: Accounting for Estates and Trusts
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Sample Questions
Q1) Prepare a schedule to show the amount of federal income tax that must be paid.
Q2) Prepare the journal entry to record the payment of the estate's liabilities for debts incurred prior to the decedent's death.
Q3) Prepare the journal entry to record payment of $20,000 in funeral expenses.
Q4) When an estate does not have sufficient assets to satisfy all claims against it, what claim has the highest priority?
A) Expenses of administering the estate.
B) Federal income taxes.
C) State income taxes.
D) Medical expenses of the final illness.
E) Back wages owed to any employees.
Q5) Title to the residence was conveyed to Louis Tweed.Prepare the journal entry to record the transaction.
Q6) In settling an estate, what is the meaning of the term legacy?
Q7) Additional debts of $78,000 were discovered.Debts totaling $130,000 were paid.Prepare the journal entry to record the transaction.
Q8) What choices does an executor of an estate have in determining the values of assets included in the estate for tax purposes?
Page 41
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Chapter 19: A: Accounting for Estates and Trusts
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Sample Questions
Q1) What are the three goals of probate laws?
Q2) In an executor's accounting for an estate, debts and other obligations are recorded
A) At book value.
B) As a reduction of income.
C) On the date of payment.
D) As soon as discovered.
E) Only if they are past due.
Q3) The party to receive a distribution of principal from an estate is legally called a(n):
A) Principal grantee.
B) Corpus benefitor.
C) Estate receiver.
D) Remainderman.
E) Estate distributee.
Q4) What is a remainderman of trust property?
Q5) Title to the residence was conveyed to Louis Tweed.Prepare the journal entry to record the transaction.
Q6) In settling an estate, what is the meaning of the term devise?
Q7) Prepare the journal entry to record the property of the estate.
Page 42
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