Acct 425 Unit 3

32 Questions | Total Attempts: 63

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Organization Quizzes & Trivia

Questions and Answers
  • 1. 
    When the hybrid method is used to record the withdrawal of a partner, the partnership 
    • A. 

      Revalues assets and liabilities and records goodwill to the continuing partner but not to the withdrawing partner.

    • B. 

      Revalues liabilities but not assets, and no goodwill is recorded.

    • C. 

      Can recognize goodwill but does not revalue assets and liabilities.

    • D. 

      Revalues assets but not liabilities, and records goodwill to the continuing partner but not to the withdrawing partner.

    • E. 

      Revalues assets and liabilities but does not record goodwill.

  • 2. 
    The advantages of the partnership form of business organization, compared to corporations, include 
    • A. 

      Single taxation

    • B. 

      Ease of raising capital.

    • C. 

      Mutual agency.

    • D. 

      Limited liability.

    • E. 

      Difficulty of formation

  • 3. 
    Which of the following is not a reason for the popularity of partnerships as a legal form for businesses?
    • A. 

      Partnerships may be formed merely by an oral agreement

    • B. 

      Partnerships can more easily generate significant amounts of capital

    • C. 

      Partnerships avoid the double taxation of income that is found in corporations

    • D. 

      In some cases, losses may be used to offset gains for tax purposes

  • 4. 
    . How does partnership accounting differ from corporate accounting?
    • A. 

      The matching principle is not considered appropriate for partnership accounting

    • B. 

      Revenues are recognized at a different time by a partnership than is appropriate for a corporation

    • C. 

      Individual capital accounts replace the contributed capital and retained earnings balances found in corporate accounting

    • D. 

      Partnerships report all assets at fair value as of the latest balance sheet date

  • 5. 
    Which of the following best describes the articles of partnership agreement?
    • A. 

      The purpose of the partnership and partners’ rights and responsibilities are required elements of the articles partnership

    • B. 

      The articles of partnership are a legal covenant and must be expressed in writing to be valid

    • C. 

      The articles of partnership are an agreement that limits partners’ liability to partnership assets

    • D. 

      The articles of partnership are a legal covenant that may be expressed orally or in writing and forms the central governance for a partnership’s operations

  • 6. 
    When a partnership is insolvent and a partner has a deficit capital balance, that partner is legally  required to: 
    • A. 

      Declare personal bankruptcy.

    • B. 

      Initiate legal proceedings against the partnership.

    • C. 

      Contribute cash to the partnership.

    • D. 

      Deliver a note payable to the partnership with specific payment terms.

    • E. 

      None of the above. The partner has no legal responsibility to cover the capital deficit balance.

  • 7. 
    Throughout a partnership liquidation, both creditors and partners need continuous accounting information that enables them to monitor and assess their financial risks. In generating these data for a partnership, the accountant must record which of the following?
    • A. 

      The conversion of partnership assets into cash.

    • B. 

      The allocation of the resulting gains and losses.

    • C. 

      The allocation of the resulting gains and losses.

    • D. 

      Any remaining unpaid debts to be settled or the distribution of any remaining assets to the partners based on capital balances

    • E. 

      All of the above

  • 8. 
    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.

  • 9. 
    Which one of the following statements is correct? 
    • A. 

      . If a partner of a liquidating partnership is unable to pay a capital account deficit, the deficit is absorbed by the other partners in the profit and loss ratio of those partners.

    • B. 

      Gains and losses from the sale of noncash assets are divided in the ratio of the partners' capital account balances if there is no income-sharing plan in the partnership contract.

    • C. 

      A loan receivable from a partner is added to the partner's capital account balance in the preparation of a cash distribution plan.

    • D. 

      Partners may not receive any cash before partnership creditors receive cash when liquidating a partnership.

    • E. 

      E. All cash payments to partners are made using their profit and loss ratio when liquidating the partnership.

  • 10. 
    Which item is not shown on the schedule of partnership liquidation? 
    • A. 

      Current cash balances.

    • B. 

      Property owned by the partnership.

    • C. 

      Liabilities still to be paid.

    • D. 

      Personal assets of the partners.

    • E. 

      Current capital balances of the partners.

  • 11. 
    If a partnership is liquidated, how is the final allocation of business assets made to the partners?  
    • A. 

      Equally

    • B. 

      According to the profits and loss ratio

    • C. 

      According to the final capital account balances

    • D. 

      According to the initial investment made by each of the partners

  • 12. 
    What is a predistribution plan?
    • A. 

      A guideline for the cash distributions to partners during a liquidation

    • B. 

      A list of the procedures to be performed during a liquidation

    • C. 

      A determination of the final cash distribution to the partners on the settlement date

    • D. 

      A detailed list of the transactions that will transpire in the reorganization of a partnership

  • 13. 
    Which standard issued by the Governmental Accounting Standards Board in 1999 requires two distinct sets of financial statements for state and local governments? 
    • A. 

      GASB Statement No. 32.

    • B. 

      GASB Statement No. 33.

    • C. 

      GASB Statement No. 34.

    • D. 

      GASB Statement No. 35.

    • E. 

      GASB Statement No. 36.

  • 14. 
    Proprietary funds are 
    • A. 

      Funds used to account for the activities of a government that are carried out primarily to provide services to citizens.

    • B. 

      Funds used to account for a government's ongoing organizations and activities that are similar to those operated by for-profit organizations

    • C. 

      Funds used to account for monies held by the government in a trustee capacity.

    • D. 

      Funds used to account for all financial resources except those required to be accounted for in another fund

    • E. 

      Funds used to account for revenues that have been legally restricted as to expenditure.

  • 15. 
    Fiduciary funds are 
    • A. 

      Funds used to account for the activities of a government that are carried out primarily to provide services to citizens

    • B. 

      Funds used to account for a government's ongoing organizations and activities that are similar to those operated by for-profit organizations.

    • C. 

      Funds used to account for monies held by the government in a trustee capacity.

    • D. 

      Funds used to account for all financial resources except those required to be accounted for in another fund.

    • E. 

      Funds used to account for revenues that have been legally restricted as to expenditure.

  • 16. 
    Governmental funds are 
    • A. 

      Funds used to account for the activities of a government that are carried out primarily to provide services to citizens.

    • B. 

      Funds used to account for a government's ongoing organizations and activities that are similar to those operated by for-profit organizations

    • C. 

      Funds used to account for monies held by the government in a trustee capacity.

    • D. 

      . Funds used to account for all financial resources except those required to be accounted for in another fund.

    • E. 

      Funds used to account for revenues that have been legally restricted as to expenditure.

  • 17. 
    What are the broad types or classifications of funds for a governmental entity such as a city? 
    • A. 

      General, governmental, and trust funds.

    • B. 

      Governmental, proprietary, and fiduciary funds

    • C. 

      Revenue, trust, and governmental funds.

    • D. 

      Enterprise, revenue, and fiduciary funds.

    • E. 

      Governmental, agency, and enterprise funds.

  • 18. 
    Under modified accrual accounting, revenues should be recognized when they are 
    • A. 

      Collected.

    • B. 

      Realizable.

    • C. 

      Reasonably estimable

    • D. 

      Measurable and available.

    • E. 

      Earned.

  • 19. 
    Which of the following funds is most likely created with an endowed gift? 
    • A. 

      Enterprise Fund.

    • B. 

      Internal Service Fund.

    • C. 

      Debt Service Fund.

    • D. 

      Capital Projects Fund.

    • E. 

      Permanent Fund.

  • 20. 
     Which of the following is not a governmental fund?
    • A. 

      Special Revenue Fund

    • B. 

      Internal Service Fund

    • C. 

      Capital Projects Fund

    • D. 

      Debt Service Fund

  • 21. 
    What is the purpose of a Special Revenue Fund  
    • A. 

      To account for revenues legally or externally restricted as an operating expenditure

    • B. 

      To account for asset transfers

    • C. 

      To account for ongoing activities

    • D. 

      To account for operations financed in whole or in part by outside user charges

  • 22. 
    A government expects to receive revenues of $400,000 but has approved expenditures of $430,000. The anticipated shortage will have an impact on which of the following terms?
    • A. 

      Interperiod equity

    • B. 

      Modified accrual accounting

    • C. 

      Consumption accounting

    • D. 

      Account groups

  • 23. 
    A citizen of the City of Townsend gives it a gift of $22,000 in investments. The citizen requires that the investments be held but any resulting income must be used to help maintain the city’s cemetery. In which fund should this asset be reported?
    • A. 

      Special Revenue Funds

    • B. 

      Capital Projects Funds

    • C. 

      Permanent Funds

    • D. 

      General Fund

  • 24. 
    At the end of the current year, a government reports a fund balance-assigned of $9,000 in connection with an encumbrance. What information is being conveyed?
    • A. 

      A donor has given the government $9,000 that must be used in a specified fashion

    • B. 

      The government has made $9,000 in commitments in one year that will be honored in the subsequent year

    • C. 

      Encumbrances exceeded expenditures by $9,000 during the current year

    • D. 

      The government spent $9,000 less than was appropriated

  • 25. 
    Which of the following is true about management’s discussion and analysis (MD&A)?
    • A. 

      It is an optional addition to the comprehensive annual financial report, but the GASB encourages its inclusion

    • B. 

      It adds a verbal explanation for the numbers and trends presented in the financial statements

    • C. 

      It appears at the very end of a government’s comprehensive annual financial report

    • D. 

      It replaces a portion of the fund financial statements traditionally presented by a state or local government

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