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modern advanced accounting

Questions and Answers of Modern Advanced Accounting

Prepare journal entries in the accounting records of both the home office and the Exeter Branch of Wardell Company to record each of the following transactions or events (omit explanations):a. Home
Among the journal entries of the home office of Turbo Company for the month ended August 31, 2005, were the following:2005 Aug. 6 Investment in Lido Branch 10,000 Cash 10,000 To record payment of
Among the journal entries for business transactions and events of the Hoover Street Branch of Usc Company during January 2005, were the following:2005 Jan. 12 Inventories 60,000 Home Office 60,000 To
On September 1, 2005, Western Company established the Eastern Branch. Separate accounting records were set up for the branch. Both the home office and the Eastern Branch use the periodic inventory
On September 1, 2005, Pasadena Company established a branch in San Marino. Following are the first three transactions between the home office and San Marino branch of Pasadena Company:Sept. 1 Home
Partner Eng plans to withdraw from Chu, Dow & Eng LLP on July 10, 2005. Partnership assets are to be used to acquire Eng’s partnership interest. The balance sheet for the partnership on that date
Alex, Baron & Crane LLP was formed on January 2, 2005. The original cash investments were as follows:Alex $ 96,000 Baron 144,000 Crane 216,000 According to the partnership contract, the partners were
Partners Lucas and May formed Lucas & May LLP on January 2, 2005. Their capital accounts showed the following changes during:Lucas, May, Capital Capital Original investments, Jan. 2, 2005 $120,000
Ross & Saye LLP was organized and began operations on March 1, 2004. On that date, Roberta Ross invested $150,000, and Samuel Saye invested land and building with current fair values of $80,000 and
The condensed balance sheet of Gee & Hawe LLP on December 31, 2004, follows:GEE & HAWE LLP Balance Sheet December 31, 2004 Assets Liabilities and Partners’ Capital Current assets $100,000
Among the business transactions and events of Oscar, Paul & Quinn LLP, whose partners shared net income and losses equally, for the month of January 2005, were the following:Jan. 2 With the consent
Lowyma Company LLP, a partnership of Ed Loeser, Peter Wylie, and Herman Martin, has operated successfully for many years, but Martin now plans to retire. In discussions of the settlement to be made
George Lewis and Anna Marlin are partners of Lewis & Marlin LLP, who share net income and losses equally. They offer to admit Betty Naylor to Lewis, Marlin & Naylor LLP for a one-third interest in
Carl Dobbs and David Ellis formed Dobbs & Ellis LLP on January 2, 2005. Dobbs invested cash of $50,000, and Ellis invested cash of $20,000 and marketable equity securities(classified as available for
May Jack Julian ethically comply with the request of the partners of Nobis, Ortho & Parr LLP? Explain.Jean Rogers, CPA, is a member of the AICPA, the IMA, and the FEI (see Chapter 1); she is employed
Dee, Ern & Fay LLP, whose partners share net income and losses equally, had an operating income of $30,000 for the first year of operations. However, near the end of that year, the partners learned
In a classroom discussion of accounting standards for limited liability partnerships, student Ronald suggested that interest on partners’ capital account balances, allocated in accordance with the
The author of Modern Advanced Accounting takes the position (page 27) that salaries awarded to partners of a limited liability partnership should be recognized as operating expenses of the
Macco Company (a limited partnership) was established on January 2, 2005, with the issuance of 10 units at $10,000 a unit to Malcolm Cole, the general partner, and 40 units in the aggregate to five
On May 31, 2005, with the consent of Nunn, Owen, and Quan:1. Sam Park retired from the partnership and was paid $50,000 cash in full settlement of his interest in the partnership.2. Lois Reed was
On August 31, 2005, Logan and Major, partners of Logan & Major Limited Liability Partnership who had capital account balances of $80,000 and $120,000, respectively, on that date and who shared net
Floyd Austin and Samuel Bradford are partners of Austin & Bradford LLP who share net income and losses equally and have equal capital account balances. The net assets of the partnership have a
Lamb and Meek, partners of Lamb & Meek Limited Liability Partnership who share net income and losses 60% and 40%, respectively, had capital account balances of $70,000 and$60,000, respectively, on
Partners Arne and Bolt of Arne & Bolt LLP have capital account balances of $30,000 and$20,000, respectively, and they share net income and losses in a 3 : 1 ratio.Prepare journal entries to record
On January 31, 2005, Nancy Ross and John Clemon were admitted to Logan, Marsh &Noble LLP (CPA firm), which had net assets of $120,000 prior to the admission and an income-sharing ratio of Logan, 25%;
Emma Neal and Sally Drew are partners of Neal & Drew LLP sharing net income or losses equally; each has a capital account balance of $200,000. Sally Drew (with the consent of Neal) sold one-fifth of
The partnership contract for Bates & Carter LLP provided for salaries to partners and the division of net income or losses as follows:1. Salaries of $40,000 a year to Bates and $60,000 a year to
The partnership contract of Ann, Bud & Cal LLP provides for the remuneration of partners as follows:1. Salaries of $40,000 to Ann, $35,000 to Bud, and $30,000 to Cal, to be recognized annually as
The partnership contract of Jones, King & Lane LLP provided for the division of net income or losses in the following manner:1. Bonus of 20% of income before the bonus to Jones.2. Interest at 15% on
The partnership contract of Ray, Stan & Todd LLP provided that Ray was to receive a bonus equal to 20% of income and that the remaining income or loss was to be divided 40% each to Ray and Stan and
Prepare a working paper to compute the division of the $48,000 net income of Webb &Yu LLP under each of the following assumptions:a. The partnership contract is silent as to sharing of net income and
On January 2, 2005, Carle and Dody established Carle & Dody LLP, with Carle investing$80,000 and Dody investing $70,000 on that date. The income-sharing provisions of the partnership contract were as
12. Which of the following typical expense of a corporation is not relevant for a limited liability partnership?a. Salaries expense.b. Interest expense.c. Income taxes expense.d. Pension expense.e.
11. The income-sharing provision of the contract that established Early & Farber LLP provided that Early was to receive a bonus of 20% of income after deduction of the bonus, with the remaining
10. Salaries to partners of a limited liability partnership typically should be accounted for as:a. A device for sharing net income.b. An operating expense of the partnership.c. Drawings by the
9. The partnership contract for Clark & Davis LLP provides that “net income or losses are to be distributed in the ratio of partners’ capital account balances.” The appropriate interpretation
8. According to this text, the recognition of goodwill in the accounting records of a limited liability partnership may be appropriate for:a. The admission of a new partner for a cash investment.b.
7. The two partners of Adonis & Brutus LLP share net income and losses in the ratio of 7 : 3, respectively. On February 1, 2005, their capital account balances were as follows:Adonis $70,000 Brutus
5. Which of the following is an expense of a limited liability partnership?a. Interest on partners’ capital account balances.b. Interest on loans from partners to the partnership.c. Both a and b
4. The partnership contract for Gore & Haines LLP provided that Gore is to receive an annual salary of $60,000, Haines is to receive an annual salary of $40,000, and the net income or loss (after
3. A large cash withdrawal by Partner Davis from Carr, Davis, Exley & Fay LLP, which is viewed by all partners as a permanent reduction of Davis’s ownership equity in the partnership, is recorded
2. When Andrew Davis retired from Davis, Evans & Fell LLP, he received cash in excess of his capital account balance. Under the bonus method, the excess cash received by Davis:a. Reduced the capital
1. The partnership contract of Lowell & Martin LLP provided for salaries of $45,000 to Lowell and $35,000 to Martin, with any remaining income or loss divided equally.During 2005, pre-salaries income
16. Differentiate between a limited liability partnership (LLP) and a limited partnership.
15. How do the financial statements of a limited partnership differ from those of a limited liability partnership?
14. A CPA firm was asked to express an auditors’ opinion on the financial statements of a limited partnership in which a corporation was the general partner. Should the financial statements of the
13. Two partners invested $2,000 each to form a limited liability partnership for the construction of a shopping center. The partnership obtained a bank loan of $800,000 to finance construction, but
12. A new partner admitted to a limited liability partnership often is required to invest an amount of cash larger than the carrying amount of the interest in net assets the new partner acquires. In
11. Should the carrying amounts of a limited liability partnership’s assets be restated to current fair values when a partner retires or a new partner is admitted to the firm?Explain.
10. Muir and Miller operated Muir & Miller LLP for several years, sharing net income and losses equally. On January 1, 2005, they agreed to revise the income-sharing ratio to 70% for Muir and 30% for
9. The partnership contract of Peel & Quay LLP is brief on the sharing of net income and losses. It states: “Net income is to be divided 80% to Peel and 20% to Quay, and each partner is entitled to
7. Ainsley & Burton LLP admitted Paul Craig to a one-third interest in the firm for his investment of $50,000. Does this mean that Craig would be entitled to one-third of the partnership’s net
6. List at least five methods by which net income or losses of a limited liability partnership may be divided among partners.
5. List at least five items that should be included in a limited liability partnership contract.
4. Explain how partners’ salaries should be displayed in the income statement of a limited liability partnership, if at all.
3. Explain the limited liability partnership balance sheet display of loans to and from partners and the accounting for interest on such loans.
2. Some large CPA firms have thousands of staff members, and hundreds of partners, and operate on a national or an international basis. Would the professional corporation form of organization be more
1. In the formation of a limited liability partnership, partners often invest nonmonetary assets such as land, buildings, and machinery, as well as cash. Should nonmonetary assets be recognized by
In a September 1998 speech, former Securities and Exchange Commission Chairman Arthur Levitt used the term cookie-jar reserves to describe a “cooking the books” technique used by some publicly
You are the chief financial officer of Playthings, Inc., a newly organized, publicly owned manufacturer of toys and games. Roy Weber, the chairman of the audit committee of the company’s board of
Evaluate the usefulness of the ethics rules of the AICPA, FEI, and IMA in relation to the foregoing quotations.Instructions Given that CPAs are subject to oversight by state boards of accountancy,
In his Meditations, the Roman emperor Marcus Aurelius Antoninus wrote as follows (Books III and VII):A man must stand erect, not be kept erect by others. . . .Be thou erect or be made
Suppose you were to participate in a debate of the following resolution:Resolved, that the following sentence from the Preamble to Section I: Principles of the AICPA Code of Professional Conduct is
12. The section of the American Institute of Certified Public Accountants Code of Professional Conduct that governs the performance of professional services by AICPA members is the:a. Principlesb.
11. According to Standards of Ethical Conduct for Members of the Institute of Management Accountants, management accountants faced with significant ethical issues should first:a. Discuss the issue
10. Compliance with generally accepted accounting principles is required by the ethics code of the:a. AICPA only.b. AICPA and FEI.c. AICPA and IMA.d. AICPA, FEI, and IMA.
8. The Report of the National Commission on Fraudulent Financial Reporting did not include recommendations for:a. Financial institution regulators.b. Legal counsel of business enterprises.c.
7. Standards of Ethical Conduct for Members of the Institute of Management Accountants deal with all of the following except:a. Competenceb. Confidentialityc. Independenced. Integritye. Objectivity
4. According to the National Commission on Fraudulent Financial Reporting (Treadway Commission), the responsibility for reliable financial reporting lies first and foremost:a. At the corporate
3. Conduct of a member’s personal affairs is addressed in the ethics code or codes of:a. The American Institute of Certified Public Accountants only.b. The Financial Executives International.c. The
2. A rule of the AICPA Code of Professional Conduct that does not apply to AICPA members in private industry is:a. Rule 101 Independence.b. Rule 102 Integrity and Objectivity.c. Rule 201 General
1. The bylaws of the AICPA require members to adhere to the Code of Professional Conduct section entitled:a. Principlesb. Rulesc. Interpretationsd. Ethics Rulings
12. What classes of accountants are subject to regulation by the Public Company Accounting Oversight Board?
11. Does the Code of Professional Conduct of the American Institute of Certified Public Accountants require AICPA members in industry to maintain the appearance of independence?Explain.
10. Does the Code of Ethics of the Financial Executives International require FEI members to maintain the confidentiality of information acquired in the course of their work in all circumstances?
9. What are the obligations of management accountants regarding conflicts of interest?
8. Does the Securities and Exchange Commission accept a “good soldier” rationalization for fraudulent financial reporting? Explain.
7. What is insider trading of corporate securities?
6. Do the ethics codes of the Institute of Management Accountants and the Financial Executives International require their members to comply with generally accepted accounting principles? Explain.
5. What Rules of Professional Conduct of the American Institute of Certified Public Accountants apply to all members of the AICPA, including management accountants?
4. How did the National Commission on Fraudulent Financial Reporting (Treadway Commission) define fraudulent financial reporting?
3. Identify the four components of ethical conduct for management accountants, set forth in Standards of Ethical Conduct for Members of the Institute of Management Accountants.
2. Why is the Equity Funding Corporation of America fraud significant for management accountants and financial executives?
1. What are cute accounting and cooking the books?
PR 17-1 What events would require partnership liquidation?
P 17-12 Installment liquidation The after-closing trial balances of the Bea, Pat, and Tim partnership at December 31, 2016, included the following accounts and balances:Cash $120,000 Accounts
P 17-11 Installment liquidation The adjusted trial balance of the Jee, Moe, and Ole partnership at December 31, 2016, is as follows:Cash $ 50,000 Accounts receivable—net 100,000 Nonmonetary assets
E17-10 Installment liquidation Account balances for the Rob, Tom, and Val partnership on October 1, 2016, are as follows:Cash $ 21,000 Accounts payable $ 80,000 Accounts receivable 63,000 Note
P 17-9 Installment liquidation—Safe payments schedules The balance sheet of Ron, Sue, and Tom, who share partnership profits 30 percent, 30 percent, and 40 percent, respectively, included the
P 17-8 Installment liquidation—Safe payments schedule Jax, Kya, and Bud, who share partnership profits 50 percent, 30 percent, and 20 percent, respectively, decide to liquidate their partnership.
2. If $25,000 cash is realized from the receivables and inventories during January 2017, how should the cash be distributed at the end of January? (Assume that this is the first distribution of cash
P 17-7 Installment liquidation The after-closing trial balance of the Lin, Mae, and Nel partnership at December 31, 2016, was as follows:Debit Credit Cash $ 47,000 Receivables—net 25,000
P 17-6 Installment liquidation Jon, Sam, and Tad are partners in a furniture store that began liquidation on January 1, 2016, when the ledger contained the following account balances:Debit Credit
P 17-5 Statement of partnership liquidation Eli, Joe, and Ned agree to liquidate their consulting practice as soon as possible after the close of business on July 31, 2016. The trial balance on that
2. During January 2017, the inventories are sold for $100,000, the other liabilities are paid, and $50,000 is set aside for contingencies. The partners agree that loan balances should be closed to
P 17-4 Installment liquidation The partnership of Gil, Hal, Ian, and Joe is preparing to liquidate. Profit- and loss-sharing ratios are shown in the summarized balance sheet at December 31, 2016, as
P 17-3[Cash distribution plan]Rama, Chakra, and Songkhla announced the liquidation of their partnership and they distribute all cash immediately using a cash distribution plan beginning on January 1,
P 17-2 Cash distribution plan Berin, Fetin, and Murat are partners in a business. They plan to liquidate their partnership as soon as possible.Profits and losses are shared between Berin, Fetin, and
If Tom contributes $70,000 to the partnership to provide cash to pay the creditors, what amount of Wes’s $90,000 partnership equity would appear to be recoverable?a $90,000 b $81,000 c $79,000 d
6. The partnership of Wes, Van, and Tom was dissolved on June 30, 2016, and account balances after noncash assets were converted into cash on September 1, 2016, are:Cash $50,000 Accounts payable

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