07 May Question1. On a partner’s personal statement of f
Question
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:
A. $181,000
B. $131,000
C. $200,000
D. $150,000
9. Based on the preceding information, the journal entry on the partnership’s books to record distribution of stock to prior partners will include a debit to Wilfred, Capital for:
A. $140,000.
B. $91,700.
C. $86,700.
D. $126,700.
10. Based on the preceding information, the journal entry on the partnership’s books to record distribution of stock to prior partners will include a debit to Mike, Capital for:
A. $38,010.
B. $31,500.
C. $42,000.
D. $44,300.
11. Based on the preceding information, the journal entry on W & M Corporation’s books to record the assets and the issuance of the common stock will include a credit to Additional Paid-In Capital for:
A. $0.
B. $81,000.
C. $31,000.
D. $50,000.
12. The CRT partnership has decided to terminate operations and to liquidate the partnership assets. There are no partner loans, and all partners have positive capital balances. Gains and losses on liquidation and cash distributions to partners should be allocated as follows:
A. Option A
B. Option B
C. Option C
D. Option D
13. According to UPA 1997, during partnership liquidation, loans the partners have made to the partnership have the same status as loans from third-party creditors. As a practical matter, most loans from partners:
A. are subordinated to third-party creditors.
B. have the same status as loans from third-party creditors.
C. are paid prior to third-party creditors.
D. None of the above.
14. In order to avoid inequalities in the liquidation process the legal doctrine of setoff effectively treats loans from partners to the partnership as:
A. outside debt that can offset a deficit capital account balance.
B. inside debt that can offset a deficit capital account balance.
C. additional capital investments that can offset a deficit capital account balance.
D. additional capital investments that can offset a partnership loss.
15. The balance sheet given below is presented for the partnership of Janet, Anton, and Millet:
The partners share profits and losses in the ratio of 5:3:2, respectively. The partners agreed to dissolve the partnership after selling the other assets for $50,000. On dissolution of the partnership, Janet should receive:
A. $0.
B. $80,000.
C. $10,000.
D. $30,000.
Bill, Page, Larry, and Scott have decided to terminate their partnership. The partnership’s balance sheet at
the time they decide to wind up is as follows:
During the winding up of the partnership, the other assets are sold for $150,000 and the accounts payable are paid. Page and Larry are personally solvent, but Bill and Scott are personally insolvent. The partners share profits and losses in the ratio of 4:2:1:3.
16. Based on the preceding information, what amount will be paid out to Bill upon liquidation of the partnership?
A. $0
B. $25,000
C. $11,667
D. $2,500
17. Based on the preceding information, what amount will be paid out to Scott upon liquidation of the partnership?
A. $0
B. $2,500
C. $25,000
D. $65,000
18. Based on the preceding information, what amount will be distributed to Page and Larry upon liquidation
of the partnership?
A. Option A
B. Option B
C. Option C
D. Option D
Bill, Page, Larry, and Scott have decided to terminate their partnership. The partnership’s balance sheet at
the time they decide to wind up is as follows:
During the winding up of the partnership, the other assets are sold for $150,000 and the accounts payable are paid. Page and Larry are personally solvent, but Bill and Scott are personally insolvent. The partners share profits and losses in the ratio of 3:2:1:4.
19. Based on the preceding information, what amount will be paid out to Bill upon liquidation of the partnership?
A. $0
B. $5,000
C. $25,000
D. $2,500
20. Based on the preceding information, what amount will be paid out to Scott upon liquidation of the partnership?
A. $0
B. $2,500
C. $5,000
D. $6,429
21. Based on the preceding information, what amounts will be distributed to Page and Larry upon liquidation
of the partnership?
A. Option A
B. Option B
C. Option C
D. Option D
The following condensed balance sheet is presented for the partnership of D, E, and F who share profits
and losses in the ratio of 5:3:2, respectively:
The partners agreed to liquidate the partnership after selling the other assets.
22. Refer to the above information. If the other assets are sold for $280,000, how much should F receive upon liquidation?
A. $44,000
B. $50,000
C. $76,000
D. $90,000
23. Refer to the above information. If the other assets are sold for $80,000, and all partners are personally insolvent, how much should E receive upon liquidation?
A. $0 cooke
B. $6,000
C. $10,000
D. $20,000
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