Partnership Accounting Test
Bank
Course Introduction
Partnership Accounting focuses on the principles and practices for accounting in partnerships, a common form of business organization. This course covers the formation of partnerships, the allocation of profit and loss among partners, changes in partnership structure such as admission or retirement of partners, and the dissolution and liquidation of partnerships. Students will learn to prepare and interpret financial statements specific to partnerships, handle capital and drawing accounts, and address issues related to goodwill and revaluation of assets. The course equips learners with practical and theoretical knowledge necessary to manage partnership accounts accurately and in compliance with relevant accounting standards.
Recommended Textbook
Advanced Accounting 13th Edition by
Floyd A. Beams
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Page 2
Chapter 1: Business Combinations
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Q1) It is frequently more expensive for a firm to obtain needed facilities through combination than through development.
A)True
B)False
Answer: False
Q2) Following the accounting concept of a business combination,a business combination occurs when a company acquires an equity interest in another entity and has
A)at least 20% ownership in the entity.
B)more than 50% ownership in the entity.
C)100% ownership in the entity.
D)control over the entity,irrespective of the percentage owned.
Answer: D
Q3) The first step in recording an acquisition is to determine the fair values of all identifiable tangible and intangible assets acquired and actual value of liabilities assumed in the combination.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Stock Investments - Investor Accounting and Reporting
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Q1) Which one of the following items,originally recorded in the Investment in Falcon Co.account under the equity method,would not be systematically used to reduce investment income on a periodic basis?
A)Amortization expense of goodwill
B)Depreciation expense on the excess fair value attributed to machinery
C)Amortization expense on the excess fair value attributed to lease agreements
D)Depreciation expense on the excess fair value attributed to building
Answer: A
Q2) Equity investments at acquisitions require direct costs of registering equity securities be charged to additional paid-in capital.
A)True
B)False Answer: True
Q3) When an investor can significantly influence or control the operations of the investee,including dividend declarations the equity method must be used. A)True
B)False Answer: True
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Chapter 3: An Introduction to Consolidated Financial Statements
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Q1) Pregler Inc.has 70% ownership of Sach Company,but should exclude Sach from its consolidated financial statements if
A)Sach is in a regulated industry.
B)Pregler uses the equity method for Sach.
C)Sach is in legal reorganization.
D)Sach is in a foreign country and records its books in a foreign currency.
Answer: C
Q2) In the consolidated income statement of Wattlebird Corporation and its 85% owned Forest subsidiary,the noncontrolling interest share was reported at $45,000.Assume the book value and fair value of Forest's net assets were equal at the acquisition date.What amount of net income did Forest have for the year?
A)$52,941
B)$38,250
C)$235,000
D)$300,000
Answer: D
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5
Chapter 4: Consolidated Techniques and Procedures
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Q1) Proceeds from the sale of land are presented in the operating activities on the consolidated cash flow statement.
A)True
B)False
Q2) Under the equity method of accounting parent-retained earnings and the consolidated-retained earnings are equal.
A)True
B)False
Q3) What amount of Goodwill will be reported?
A)$54,400
B)$68,000
C)$72,000
D)$90,000
Q4) In the consolidated balance sheet,the GAAP requires that the amount of goodwill be shown as a separate balance sheet item even if it is immaterial.
A)True
B)False
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Chapter 5: Intercompany Profit Transactions - Inventories
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Q1) The elimination entry under the perpetual inventory system for intercompany sales and purchases is a debit to sales and a credit to purchases.
A)True
B)False
Q2) What amount of unrealized profit did Pelga Company have at the end of 2015?
A)$10,000
B)$12,500
C)$50,000
D)$62,500
Q3) If the sale referred to above was a downstream sale,the total sales revenue reported in the consolidated income statement for 2014 would be
A)$870,000.
B)$880,000.
C)$920,000.
D)$970,000.
Q4) The ending inventory of the purchasing affiliate reflects the intercompany transfer price.
A)True B)False
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Chapter 6: Intercompany Profit Transactions - Plant Assets
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Q1) Unrealized inventory profits self-correct over any three accounting periods.
A)True
B)False
Q2) Pigeon Corporation purchased land from its 60%-owned subsidiary,Seed Inc.,in 2012 at a cost $50,000 greater than Seed's book value.In 2014,Pigeon sold the land to an outside entity for $20,000 more than Pigeon's book value.The 2014 consolidated income statement should report a gain on the sale of land of A)$12,000.
B)$20,000.
C)$42,000.
D)$70,000.
Q3) An entry is necessary to eliminate the full amount of the gain on the sale of land and to reduce the land to its cost basis to the consolidated entity whether the intercompany sale is upstream or downstream.
A)True
B)False
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8
Chapter 7: Intercompany Profit Transactions - Bonds
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Q1) A constructive retirement of parent bonds occurs when an affiliate purchases outstanding bonds of the parent.
A)True
B)False
Q2) Using the original information,the elimination entries on the consolidation working papers prepared on December 31,2014 included at least
A)debit to Bond Interest Expense for $360,000.
B)credit to Bond Interest Expense for $180,000 and a debit to Bond Interest Payable for $90,000.
C)credit to Bond Interest Receivable for $180,000.
D)debit to Bond Interest Revenue for $360,000.
Q3) Bond Interest Receivable for 2013 of Pfadt's bonds on Senat's books was
A)$5,400.
B)$6,000.
C)$10,800.
D)$12,000.
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Chapter 8: Consolidations - Changes in Ownership
Interests
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Q1) The GAAP requires that the parent corporation account for the effect of decreased ownership percentage as an equity transaction.
A)True
B)False
Q2) Assume that Penguin sold the additional 3,000 shares to outside interests for $150,000 on January 2,2014.Giant's percentage ownership immediately after the sale of additional stock would be
A)66-2/3%.
B)75%.
C)80%.
D)83-1/3%.
Q3) When a parent/investor sells an ownership interest,a gain or loss is recorded where the interest sold leads to deconsolidation of a former subsidiary.
A)True
B)False
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Chapter 9: Indirect and Mutual Holdings
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Q1) On January 1,2014 Paki Inc.bought 75% interest in Adam Corporation.At the time of purchase,Adam owned 80% of Baird Company.In all acquisitions,the book value equals the fair value,which equals the acquisition cost.Separate earnings (loss)(excluding investment income)for the three affiliates for 2014 are as follows: \[\begin{array} { l c c } & \text { Separate } \\ &\text { Earnings (Loss)}&\text { Dividends }\\
\text { Paki Inc. } & \$ 400,000 & \$ 150,000 \\
\text { Adam Corporation } & ( 50,000 ) & 90,000 \\ \text { Baird Company } & 100,000 & 35,000 \end{array}\] Required:
Compute controlling interest share of consolidated net income and noncontrolling interest shares for Paki and affiliates for 2014.
Q2) The amount of income for the current year assigned to the noncontrolling shareholders of Abussi Corporation is
A)$48,000.
B)$53,200.
C)$74,000.
D)$79,200.
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Chapter 10: Subsidiary Preferred Stock, consolidated
Earnings Per Share, and Consolidated Income Taxation
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Q1) The call or redemption price of preferred stock is used to allocate the investee's equity to preferred stockholders.
A)True
B)False
Q2) If a parent company has controlling interest in a subsidiary which has no potentially dilutive securities outstanding,then in the calculation of consolidated diluted EPS,it will be necessary to
A)only make an adjustment of subsidiary's basic earnings.
B)replace the parent's equity in subsidiary earnings with the parent's equity in subsidiary's diluted EPS.
C)make a replacement calculation in the parent's basic earnings for the EPS.
D)only use the parent's common shares and shares represented by the parent's potentially dilutive securities.
Q3) A parent's net income and the controlling share of the consolidated net income are equal under the equity method.
A)True
B)False
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Page 12
Chapter 11: Consolidation Theories, push-Down Accounting, and Corporate Joint Ventures
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Q1) Under GAAP,the ________ will include the variable interest entity in consolidated financial statements.
A)special purpose entity
B)limited liability company
C)trust
D)primary beneficiary
Q2) Companies in which equity investors cannot provide financing for the entity's business risks and activities without additional financial support are considered variable interest entitites according to the GAAP.
A)True
B)False
Q3) Noncontrolling interest share is viewed as an expense under ________ theory.
A)parent company
B)entity
C)contemporary
D)joint venture
Q4) Push-down capital is an additional paid-in capital account.
A)True
B)False
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Chapter 12: Derivatives and Foreign Currency: Concepts and Common Transactions
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Q1) On October 15,2014,Napole Corporation,a French company,ordered merchandise listed on the internet for 20,000 Euros from Adams Corporation,a U.S.corporation.The euro rate was $1.20 (U.S.dollars)on October 15.On November 15,2014 Adams shipped the goods and billed Napole the purchase price of 20,000 Euros when the euro rate was $1.30.Napole paid the bill on December 10,2014,and Adams immediately exchanged the 20,000 Euros for U.S.dollars when the Euro rate was $1.28 on December 10,2014. Required:
Compute the foreign currency gain or loss on the December 31,2014 financial statements of Adams and show the related journal entries.
Q2) Futures contracts are very standardized and more easy to trade in the markets than forward contracts.
A)True
B)False
Q3) What exchange gain or loss appeared on Sooty's 2014 income statement?
A)a loss of $10,000
B)a loss of $15,000
C)a gain of $10,000
D)a gain of $15,000
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Chapter 13: Accounting for Derivatives and Hedging Activities
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Q1) One characteristic of a derivative is it does not require or permit net settlements. A)True
B)False
Q2) Hedge accounting is designed to record changes in the value of the hedged item and in the value of the hedging instrument in the same accounting period.
A)True
B)False
Q3) On December 18,2014,Wabbit Corporation (a U.S.Corporation)has a Forward Contract recorded on their ledger as a debit balance of $17,500.The forward contract was related to a purchase of electronic components purchased overseas,which were going to be re-sold in the United States.On December 20,the forward contract was settled with a payment of $20,000,and the related parts which cost $118,000 were sold for $160,000 cash.The forward contract is set up to lock in the price for the electronic components when they are sold.The forward contract was settled net.Assume this is a cash flow hedge.
Required:
Prepare the journal entries required by Wabbit on December 20.
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Page 15
Chapter 14: Foreign Currency Financial Statements
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Q1) When the functional currency of a foreign entity is the U.S.dollar,the foreign entity's accounts are remeasured into its U.S.dollar functional currency.
A)True
B)False
Q2) A foreign subsidiary's accounts receivable balance should be translated for the consolidated financial statements at
A)the appropriate historical rate.
B)the prior year's forecast rate.
C)the future rate for the next year.
D)the spot rate at year-end.
Q3) Gains and losses from foreign currency transactions which are designated as economic hedges of a net investment in a foreign subsidiary are recorded as translation adjustments of stockholder's equity.
A)True
B)False
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Chapter 15: Segment and Interim Financial Reporting
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Q1) The estimated taxable income for Shebill Corporation on January 1,2014,was $80,000,$100,000,$100,000 and $120,000,respectively,for each of the four quarters of 2014.Shebill's estimated annual effective tax rate was 30%.During the second quarter of 2014,the estimated annual effective tax rate was increased to 34%.Given only this information,Shebill's second quarter income tax expense was
A)$30,000.
B)$34,000.
C)$37,200.
D)$61,200.
Q2) For an operating segment to be considered a reporting segment under the revenue threshold,its reported revenue must be 10% or more of
A)the combined enterprise revenues,eliminating all relevant intracompany transfers and balances.
B)the combined revenues,excluding intersegment revenues,of all operating segments. C)the combined revenues,including intersegment revenues,of all operating segments.
D)the consolidated revenue of all operating segments.
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17
Chapter 16: Partnerships - Formation,operations,and
Changes in Ownership Interests
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Q1) Under a partnership,each partner has mutual agency and limited liability.
A)True
B)False
Q2) When a new partner joins the partnership,the old partnership is dissolved,the books are closed and a new partnership agreement is established.
A)True
B)False
Q3) The death of a partner results in a dissociation and requires a settlement with the estate of the deceased partner.
A)True
B)False
Q4) Under the Uniform Partnership Act,loans made by a partner to the partnership are treated as
A)liabilities to the partnership for which interest shall be paid from the date of the liability.
B)advances to the partnership that are carried in the partners' capital accounts.
C)Accounts Payable of the partnership for which interest is paid.
D)advances to the partnership for which interest does not have to be paid.
18
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Chapter 17: Partnership Liquidation
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Q1) Safe payments are based on the assumptions that all partners are personally solvent and all noncash assets represent possible losses.
A)True
B)False
Q2) If all partners are included in the first installment of an installment liquidation,then in future installments
A)cash will be distributed according to the residual profit and loss sharing ratios.
B)cash should not be distributed until all non-cash assets are converted into cash.
C)vulnerability rankings for each partner should be prepared.
D)a cash distribution plan must be prepared so that partners will know when they will be included in cash distributions.
Q3) Using a safe payments schedule,how much cash should Melvin receive in the first distribution?
A)$81,000
B)$165,000
C)$168,600
D)$202,500
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Chapter 18: Corporate Liquidations and Reorganizations
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Q1) The inability to make payments on time is equity insolvency.
A)True
B)False
Q2) Which condition must be met for fresh-start reporting for an emerging company from Chapter 11?
A)Holders of existing voting shares immediately before confirmation of the reorganization plan must receive more than fifty percent of the emerging entity.
B)The loss of control by voting shareholders must be temporary.
C)The reorganization value of the emerging entity's assets immediately before the date of the confirmation of the reorganization plan must be less than the total of all postpetition liabilities and allowed claims.
D)The fresh-start entity must have a deficit.
Q3) When total debts exceed the fair value of total assets it is referred to as equity insolvency.
A)True
B)False
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Chapter 19: An Introduction to Accounting for State and Local Governmental Units
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Q1) What basis of accounting is used to prepare Government-wide financial statements?
A)Modified accrual basis
B)Accrual basis
C)Cash basis
D)Fiduciary basis
Q2) A fund
A)has its own accounting equation.
B)has consolidated financial statements for all funds.
C)must follow GAAS.
D)always uses modified accrual accounting.
Q3) Government business type activities provide services to users for fees that are intended to recover all or a portion of the costs of providing the services.
A)True
B)False
Q4) Appropriations are approved or authorized expenditures.
A)True
B)False
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Chapter 20: Accounting for State and Local Governmental Units
- Governmental Funds
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Q1) The City of Electri entered the following transactions during 2014:
1.Borrowed $120,000 for a six-month term,to be paid upon receipt of property tax payments which were previously billed.
2.Used the funds borrowed to purchase a new fire truck.The truck is expected to have a 15-year useful life,and a $5,000 residual value.
3.Received $90,000 cash from a state grant.Funds are restricted for the purchase of a second fire truck.
4.Used the grant funds received to purchase a second fire truck.The truck is expected to have a 15-year useful life,and a $5,000 residual value.
5.Nonreciprocal transfer of $50,000 to the Debt Service Fund to be used toward repayment of the note.
Required:
Prepare the journal entries in the General Fund for the transactions.
Q2) Permanent funds are normally for nonexpendable resources set aside for support of a government's programs or citizenry.
A)True
B)False
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Page 22
Chapter 21: Accounting for State and Local Governmental Units
- Proprietary and Fiduciary Funds
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Q1) Fiduciary funds are to account for assets held in a trustee or agency capacity on behalf of others internal to the governmental entity.
A)True
B)False
Q2) On the Statement of Net Position,in place of stockholders' equity,proprietary funds report
A)Retained Earnings only.
B)Restricted Cash only.
C)Unrestricted Cash only.
D)Net Position.
Q3) GASB Statement No.9 separates financing activities on the cash flow statement into two components: noncapital and capital related.
A)True
B)False
Q4) Enterprise funds primarily provide goods and services to government agencies.
A)True
B)False
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Chapter 22: Accounting for Not-For-Profit Organizations
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Q1) Wilhelman University,a not-for-profit,nongovernmental university,had the following transactions in 2014.
1.Tuition bills were sent amounting to $4,000,000,with tuition waivers granted on that amount of $200,000.
2.State funding was received in the amount of $2,000,000.
3.The bookstore and cafeteria sales amounted to $1,600,000,and their cost of sales was $1,500,000.Assume cash sales and cash purchases for these auxiliary operations.
4.Endowment income amounted to $100,000 that was restricted to chair the accounting department,and $200,000 of unrestricted income.
5.Expenses were incurred and paid as follows: faculty,$3,800,000 (including faculty chair,paid in part by endowment income); Student services,$250,000; Facilities operations,$350,000; and scholarships (excluding tuition waived),$400,000.
Required:
Prepare the journal entries for 2014 for Wilhelman University.
Q2) Nongovernmental not-for-profit entities follow FASB standards.
A)True B)False
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Chapter 23: Estates and Trusts
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Q1) Under the Uniform Probate Code,the personal representative must publish for what time period a notice in a newspaper of general circulation in the county in which the decedent resided?
A)For one week
B)For two weeks
C)For three weeks
D)For five weeks
Q2) If estate assets are insufficient to pay all claims in full,under the Uniform Probate Code which of the following would be paid first?
A)Reasonable funeral expenses
B)Necessary medical and hospital expenses of the last illness of the decedent
C)Unsecured debts
D)The costs and expenses of administration of the estate
Q3) The charge-discharge statement shows the accountability of estate property received and maintained or disbursed in accordance with the will.
A)True
B)False
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