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QUESTION 14 The following is the priority sequence in which liquidation proceeds will be distributed for a partnership partnership drawings, partnership liabilities, partnership loans, partnership

QUESTION 14

  1. The following is the priority sequence in which liquidation proceeds will be distributed for a partnership

partnership drawings, partnership liabilities, partnership loans, partnership capital balances

partnership liabilities, partnership loans, partnership capital balances

partnership liabilities, partnership loans, partnership drawings, partnership capital balances

partnership liabilities, partnership capital balances, partnership loans

5 points

QUESTION 15

  1. In a lump-sum liquidation of a partnership

all assets are paid to the partners based on their initial contribution, with the oldest partnering being paid back first

all assets are paid to the partners based on an equal distribution regardless of when the partner was admitted to the partnership

all assets must be realized before any distribution can be made

all assets are paid to the partners, at the same time, based the fair market value at the time they were initial donated to the partnership

5 points

QUESTION 16

When a partner withdraws from a partnership and the remaining partners acquire that interest

this may have an effect on the liquidity of the partnership

this will increases the cash flow into the partnership

this will always create goodwill for an amount equal to the withdrawing partners original interest in the partnership

this will cause all assets to be written down to offset the acquisition cost of the withdrawing partners interest at the time of the withdraw

5 points

QUESTION 17

You are the controller of A company that has just recently merged with B company. You are asked to communicate with top management on how you would account for the merger. While you are doing some research you find an old accounting textbook left on the bookshelf by your predecessor who retired after 30 years. Based on your readings in this book you are thinking about using the pooling method for this transaction. This method

requires assets only to be recorded at historical costs and liabilities at fair value

requires all assets to be recorded at historical cost

requires all assets and liabilities to be recorded at fair value

is no longer an acceptable method

5 points

QUESTION 18

You are the controller of Parent company and have been asked to communicate your findings on a situation that is in the best interest of the company. Parent company would like to sell bonds to obtain financing. Parent company owns an 80% interest in Subsidiary company and interest rates are down. Subsidiary company is smaller than Parent company and has a lower credit rating. Parent company would like to reduce interest costs on Subsidiary company debt. You have decided

the intercompany debt would be eliminated when consolidated statements are prepared so this would be a good idea

the intercompany debt would not be eliminated when consolidated statements are prepared therefore showing a high current ratio to the parent

the intercompany debt would not be eliminated when consolidated statements are prepared therefore showing a high current ratio to the subsidiary

a parent can not incur debt for a subsidiary

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