1.Joint and several liability in a partnership means that:

a.Each partner has personal liability for partnership obligations.

b.Each partner's personal liability for partnership obligations is limited to their initial investment in the partnership.

c.Each partner's personal liability for partnership obligations is limited to the balance in their capital account.

d.Partners are responsible for their own actions but not the actions of the other partners.

2.A salary paid to a partner is reported as:

a.A reduction in his or her capital account

b.A charge to dividends, a temporary account closed to partnership retained income

c.An expense, reducing partnership income

d.A deferred outflow, amortized to expense over time

3.Which statement is true concerning a Chapter 7 liquidation?

a.Chapter 7 is applicable to businesses but not individuals.

b.Proceedings from the sale of assets are distributed to creditors on a pro rata basis.

c.A company may be allowed to remain in possession of its assets during liquidation.

d.Obligations to employees are not discharged once Chapter 7 proceedings are complete.

Use the following information for Questions 4 - 10.

On May 1, 2020, Rolly Industries begins liquidation activities and adopts the liquidation basis of accounting.The book value of its reported assets total $700,000, including $10,000 in cash, and the book value of its liabilities, consisting of bank loans, total $600,000.Expected proceeds from reported assets other than cash are:

Receivables, $50,000

Inventories, $150,000

Plant and equipment, $300,000

Previously unreported identifiable intangible assets have a fair value of $80,000.Expected costs of liquidating assets are $20,000, and negotiations are in process to reduce Rolly's bank loans by 25%.

4.The May 1, 2020 statement of net assets in liquidation reports total assets in the amount of:

a.$710,000.

b.$590,000.

c.$510,000.

d.$500,000.

5.The May 1, 2020 statement of net assets in liquidation reports total liabilities in the amount of:

a.$600,000.

b.$450,000.

c.$620,000.

d.$470,000.

Use the following additional information to answer Questions 6 - 10.

During the two months ending June 30, 2020, the following transactions occur:

Receivables of $48,000 are collected and the rest are determined to be uncollectible.

Inventories are sold for $100,000.

Plant and equipment is sold for $125,000.

The identifiable intangible assets are sold for $72,000.

Liquidation costs of $10,000 are paid.

Bank loans of $325,000 are paid, and creditors holding $275,000 of loans agree to accept $250,000 as full payment.

Fair values of remaining assets other than cash are:

Inventories, $55,000

Plant and equipment, $185,000

Estimated future liquidation costs are $6,000.

6.On the statement of changes in net assets in liquidation for the two months ending June 30, 2020, the remeasurement gain or loss on accrued liquidation costs is:

a.$4,000 gain

b.$4,000 loss

c.$10,000 gain

d.$10,000 loss

7.On the statement of changes in net assets in liquidation for the two months ending June 30, 2020, the remeasurement gain or loss on bank loans is:

a.$300,000 loss

b.$25,000 gain

c.$25,000 loss

d.$50,000 gain

8.On the statement of changes in net assets in liquidation for the two months ending June 30, 2020, the remeasurement gain or loss on plant and equipment is:

a.$15,000 loss

b.$125,000 gain

c.$75,000 loss

d.$10,000 gain

9.On the statement of net assets in liquidation at June 30, 2020, total assets are:

a.$240,000

b.$266,000

c.$260,000

d.$250,000

10.On the statement of net assets in liquidation at June 30, 2020, total liabilities are:

a.$256,000

b.$250,000

c.$264,000

d.$275,000

11.Which of the following is exempt from the reporting provisions of the 1934 Securities Act?

a.Financial derivatives used for hedging.

b.Securities issued by mutual funds.

c.Securities issued by a state government.

d.Preferred stock issued by corporations.

12.Securities issued by all of the following organizations are exempt from the registration requirements of the 1933 Securities Act except:

a.Not-for-profit organizations.

b.State and local governments.

c.Banks.

d.Investment companies.

13.The SEC is organized into several divisions, including all of the following except:

a.Division of Investment Management.

b.Division of Trading and Markets.

c.Division of Enforcement.

d.Division of Fraud and Insider Trading.

14.The SEC division most frequently encountered by accountants is the:

a.Division of Corporation Finance.

b.Division of Enforcement.

c.Division of Trading and Markets.

d.Division of Investment Management.

Use the following information to answer Questions 15 - 20.

Patel and Rao decide to form a partnership.Patel contributes $300,000 in cash.Rao contributes buildings and equipment with a fair market value of $500,000, subject to a mortgage of $150,000, which the partnership assumes.

15.If each partner's capital account is initially set equal to net assets invested at fair market value, the entry to record the partnership formation includes the following:

a.A credit to Patel's capital account for $150,000.

b.A credit to Patel's capital account for $325,000.

c.A credit to Rao's capital account for $500,000.

d.A credit to Rao's capital account for $350,000.

16.Assume the partners specify an agreed-upon percentage in the initial partner capital, as follows: 40% to Patel, and 60% to Rao.If the bonus approach to partnership formation is used, Rao's initial capital balance will be:

a.$350,000

b.$390,000

c.$325,000

d.$480,000

17.Assume the partners specify an agreed-upon percentage in the initial partner capital, as follows: 40% to Patel, and 60% to Rao.If the goodwill approach to partnership formation is used, the initial entry to record the formation of the partnership will recognize goodwill of:

a.$400,000

b.$250,000

c.$100,000

d.$150,000

18.Assume the partners specify an agreed-upon percentage in the initial partner capital, as follows: 40% to Patel, and 60% to Rao.If the goodwill approach to partnership formation is used, Rao's initial capital balance is:

a.$410,000

b.$350,000

c.$400,000

d.$450,000

19.Assume the partners specify an agreed-upon percentage in the initial partner capital, as follows: 60% to Patel, and 40% to Rao.If the goodwill approach to partnership formation is used, the initial entry to record the formation of the partnership will recognize goodwill of:

a.$400,000

b.$150,000

c.$225,000

d.$375,000

20.Assume the partners specify an agreed-upon percentage in the initial partner capital, as follows: 60% to Patel, and 40% to Rao.If the goodwill approach to partnership formation is used, Rao's initial capital balance is:

a.$425,000

b.$375,000

c.$525,000

d.$350,000

21.Which statement is false concerning the liquidation basis of accounting?

a.Liabilities are reported at full book value, unless terms have been legally renegotiated.

b.Expected liquidation costs are netted against asset fair values.

c.Expected compensation to be paid is accrued as a liability, even if it has not yet been earned.

d.Previously unreported identifiable intangible assets are reported at fair value.

22.A company entering liquidation has reported assets with a book value of $900,000 and a liquidation value of $650,000.It also has previously unreported customer lists with a fair value of $50,000.Estimated liquidation costs are $40,000.The company's statement of net assets in liquidation reports total assets of:

a.$660,000

b.$900,000

c.$700,000

d.$650,000

23.A company entering liquidation has reported assets with a book value of $900,000 and a liquidation value of $600,000, and previously unreported customer lists with a fair value of $50,000.During the next month, it sells assets for $200,000.Remaining assets have a fair value of $460,000.The company's statement of changes in net assets in liquidation for the month reports a remeasurement gain or loss on assets of:

a.$240,000 loss

b.$60,000 gain

c.$140,000 loss

d.$10,000 gain

24.Following GAAP, the liquidation basis of accounting is appropriate

a.If the liquidation value of the company's assets is less than the company's liabilities.

b.If liquidation values are documented.

c.When it is extremely likely that liquidation will occur.

d.When a company declares bankruptcy.

25.Following the liquidation basis of accounting, the total income effect of liquidation is reported

a.As liquidation occurs.

b.At its estimated value, at the start of the liquidation process.

c.At the end of the liquidation process.

d.When obligations are paid.

26.Following the liquidation basis of accounting, employee compensation earned during the liquidation period is

a.Accrued in full at its estimated amount at the start of the liquidation process.

b.Accrued as it is earned.

c.Reported when paid.

d.Not reported.

27.Which SEC publications are similar to FASB Technical Bulletins?

a.Financial Reporting Releases

b.Staff Accounting Bulletins

c.Accounting and Auditing Enforcement Releases

d.Interpretive Letters

28.When the information provided to the SEC for a new security issue meets SEC requirements, this means that:

a.The information provides adequate disclosure of material facts concerning the company and the securities it proposes to sell.

b.The company's governance structure provides adequate internal controls over the financial information provided.

c.Independence requirements for the CEO, board of directors, and the audit committee have been met.

d.Financial information has been audited and given a clean audit opinion.

29.Xun, Yue and Zhuo have interests in XYZ Partnership.Partnership income for the year is $400,000. The partnership agreement specifies that Xun is to receive an annual salary of $200,000, Yue is to receive an annual salary of $50,000, and Zhuo is to receive an annual salary of $120,000.Any remaining income or loss is to be divided between the three partners in a 2:1:1 ratio.Salaries are to be fully implemented.Partnership income allocated to Zhuo is:

a.$112,500

b.$127,500

c.$120,000

d.$126,000

30.Xun, Yue and Zhuo have interests in XYZ Partnership.Partnership income for the year is $350,000. The partnership agreement specifies that Xun is to receive an annual salary of $200,000, Yue is to receive an annual salary of $50,000, and Zhuo is to receive an annual salary of $120,000.Any remaining income or loss is to be divided between the three partners in a 2:1:1 ratio.Salaries are to be fully implemented.Partnership income allocated to Yue is:

a.$40,000

b.$55,000

c.$50,000

d.$45,000

31.Xun, Yue and Zhuo have interests in XYZ Partnership.Partnership income for the year is $296,000. The partnership agreement specifies that Xun is to receive an annual salary of $200,000, Yue is to receive an annual salary of $50,000, and Zhuo is to receive an annual salary of $120,000.Any remaining income or loss is to be divided between the three partners in a 2:1:1 ratio.Salaries are to be proportionately implemented.Partnership income allocated to Xun is:

a.$172,000

b.$163,000

c.$160,000

d.$200,000

32.A company has the following balance sheet:

Plant and equipment

$500,000

Loans payable

$150,000

Mortgage payable

300,000

_______

Shareholders' equity

50,000

Total

$500,000

Total

$500,000

The plant and equipment has a realizable value of $350,000, and is pledged as security for the mortgage.The estimated deficiency to unsecured creditors is:

a.$50,000

b.$100,000

c.$150,000

d.$200,000

33.A company has the following balance sheet:

Inventory

$60,000

Accounts payable

$75,000

Equipment, net

150,000

Loan payable

180,000

_______

Shareholders' equity

(45,000)

Total

$210,000

Total

$210,000

The inventory has a realizable value of $50,000, and the equipment has a realizable value of $140,000.The equipment secures the loan payable and the accounts payable are unsecured.The estimated deficiency to unsecured creditors is:

a.$115,000

b.$45,000

c.$140,000

d.$65,000

Use the following information to answer Questions 34 and 35 below.

A statement of affairs shows $30,000 of assets pledged to partially secured creditors, liabilities of $65,000 to partially secured creditors, liabilities of $25,000 to unsecured creditors with priority, and liabilities of $90,000 to other unsecured creditors.

34.What are total unsecured liabilities, as reported on the statement of affairs?

a.$90,000

b.$100,000

c.$125,000

d.$155,000

35.If the estimated deficiency to unsecured creditors is $40,000, what is the amount of total free assets, as reported on the statement of affairs?

a.$50,000

b.$75,000

c.$85,000

d.$110,000

36.Regulations S-X and S-K provide the rules for different aspects of periodic filings.Which statement below is true?

a.Regulation S-X governs the content of the 10-K, while Regulation S-K governs the content of all other periodic filings.

b.Regulation S-K governs the content of the 10-K, while Regulation S-X governs the content of all other periodic filings.

c.Regulation S-X governs the financial statements and supplementary financial information in periodic filings, while Regulation S-K governs all other items in periodic filings.

d.Regulation S-K governs the financial statements and supplementary financial information in periodic filings, while Regulation S-X governs all other items in periodic filings.

37.Which of the following statements concerning the SEC's EDGAR system is false?

a.EDGAR allows users to electronically search for filing information.

b.Most documents filed with EDGAR are available in multiple formats.

c.Documents filed with EDGAR do not include nonfinancial information.

d.Documents filed with EDGAR include Form 10-K and Form 10-Q.

Use the following information for Questions 38 - 40:

Hopeful Company's balance sheet is as follows:

Hopeful Company

Balance Sheet, pre-quasi-reorganization

Assets

Liabilities and Equity

Cash

$60,000

Loans payable

$1,220,000

Inventories

550,000

Common stock, $10 par

550,000

Property (net)

950,000

Additional paid-in capital

400,000

________

Retained earnings

(610,000)

Total

$1,560,000

Total

$1,560,000

The company enters into a quasi-reorganization.Pursuant to this plan, inventories are written down by $50,000 and property is reduced by $180,000.The par value of the common stock is reduced to $2/share.

38.After the quasi-reorganization, total assets are reported at:

a.$1,560,000

b.$1,790,000

c.$1,330,000

d.$1,270,000

39.At the completion of the quasi-reorganization process, the balance in additional paid-in capital is:

a.$230,000

b.$0

c.$400,000

d.$55,000

40.At the completion of the quasi-reorganization process, the balance in the common stock, $2 par account is:

a.$550,000

b.$440,000

c.$55,000

d.$110,000