Question 1. On a partner’s personal statement of financial condition, how should liabilities be valued?

1. On a partner’s personal statement of financial condition, how should liabilities be valued?

I. Present value

II. Lower of present value or cash settlement amount

A. I

B. II

C. Both I and II

D. Neither I nor II

2. On a partner’s personal statement of financial condition, assets and liabilities are presented:

I. As current and noncurrent.

II. In order of liquidity and maturity.

A. I

B. II

C. Both I and II

D. Neither I nor II

3. The personal financial statements of a partner include which of the following?

I. Statement of financial condition.

II. Statement of changes in net worth.

III. Statement of cash flows.

A. I and II

B. I and III

C. II and III

D. I, II, and III

4. On a partner’s personal statement of financial condition, how are assets valued?

A. Historical cost

B. Book value

C. Discounted value

D. Estimated current value

5. On a partner’s personal statement of changes in net worth, what type(s) of income is (are) recognized?

I. Realized

II. Unrealized

A. I only

B. II only

C. Both I and II

D. Neither I nor II

6. When is a partnership considered to be insolvent?

I. When the total of all partners’ capital accounts results in a debit balance.

II. When at least one of the partners is personally insolvent.

A. I only

B. II only

C. Both I and II

D. Neither I nor II

7. On December 31, 20X8, Mr. and Mrs. Williams owned a parcel of land held as an investment. The land was purchased for $40,000 in 20X6, and was encumbered by a mortgage with a principal balance of $30,000 at December 31, 20X8. On this date the fair value of the land was $75,000. In the Williams’ December 31, 20X8, personal statement of financial condition, at what amount should the land

investment and mortgage payable be reported?

A. Option A

B. Option B

C. Option C

D. Option D

The trial balance of WM Partnership is as follows:

Wilfred and Mike decide to incorporate their partnership. The partnership’s books will be closed, and new books will be used for W & M Corporation. The following additional information is available:

1. The estimated fair values of the assets follow:

2. All assets and liabilities are transferred to the corporation.

3. The common stock is $10 par. Wilfred and Mike receive a total of 10,000 shares.

4. The partners share profits and losses in the ratio 7:3.

8. Based on the preceding information, the journal entry on the partnership’s books to record the Investment in W&M Corporation Stock will be debited for:

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