Acc407 Advanced Accounting: Week 1 Quiz (Version 2)

Acc407 Advanced Accounting Week 1 Quiz (Version 2) 1.Griffin and Rhodes formed a partnership on January 1, 2009. Griffin contributed cash of $120,000 and Rhodes contributed land with a fair value of $160,000. The partnership assumed the mortgage on the land which amounted to $40,000 on January 1. Rhodes originally paid $90,000 for the land. On July 31, 2009, the partnership sold the land for $190,000. Assuming Griffin and Rhodes share profits and losses equally, how much of the gain from sale of land should be credited to Griffin for financial accounting purposes? (Points : 1) $0 $15,000 $35,000 $45,000 2. Transferable interest of a partner includes all of the following except: (Points : 1) the partner's share of the profits and losses of the partnership. the right to receive distributions. the right to receive any liquidating distribution. the authority to transact any of the partnership's business operations. 3. In the computation of a partner's Loss Absorption Power (LAP), which of the following statements is incorrect? I. The computation of LAPs for all partners allows cash to be distributed before all partnership assets have been sold and all creditors have been paid. II. The computation of LAPs for all partners indicates the relative strength of each partner's net capital position so that available cash is distributed in respective loss-sharing ratios. (Points : 1) I II Both I and II Neither I nor II 4. If A is the total capital of a partnership before the admission of a new partner, B is the total capital of the partnership after the admission of the new partner, C is the amount of the new partner's investment, and D is the amount of capital credited to the new partner, then there is: (Points : 1) goodwill to the new partner if B (A + C) and D < C. goodwill to the old partners if B = A + C and D C. a bonus to the new partner if B = A + C and D C. neither bonus nor goodwill if B (A + C) and D C. 5. Which of the following statements best describes limited partnerships? (Points : 1) In an LLP, there must be at least one general partner that is personally liable for the obligations of the partnership and has management responsibilities. There are no general or limited partners in an LP; each partner has the rights and duties of a general partner, but limited legal liability. The identifier LP or LLP need not be included in the name or identification of a limited partnership. If the presumption of control by the general partner can be overcome, the partner would account for its investment using the equity method of accounting. 6. Which of the following items are important in the determination of safe installment payments to partners? I. Deficits created in capital accounts are distributed to the remaining partners. II. All unsold noncash assets are assumed to be worthless. (Points : 1) I only II only Both I and II Neither I nor II 7. The balance sheet given below is presented for the partnership of Janet, Anton, and Millet: Cash $ 60,000 Liabilities $ 80,000 Other Assets 150,000 Janet, Capital 80,000 Anton, Capital 30,000 Millet, Capital 20,000 Total $210,000 Total $210,000 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: (Points : 1) $0. $80,000. $10,000. $30,000. 8. 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 (Points : 1) I II Both I and II Neither I nor II 9. Which of the following observations is true of an S corporation? (Points : 1) It elects to be taxed in the same manner as a corporation. It does not have the burden of double taxation of corporate income. Its shareholders have personal liability for the corporation's obligations. Its primary income source should be passive investments. 10. The BIG Partnership has decided to liquidate at December 31, 20X8. The capital and loan balances of the partners at December 31, 20X8, are provided below: Partners Capital Balances Loan Balances Profit-and-Loss Sharing % B $210,000 CR $40,000 CR 50% I $240,000 CR 100,000 DR 20% G 40,000 CR 80,000 CR 30% If you were to calculate the Loss Absorption Power for each partner, how would the partners rank (from highest to lowest LAP)? (Points : 1) B, I, G I, B, G B, G, I G, I, B