Q&A Hero

Q: Oscar Lloyd is serving as the executor for the estate of Dixie Cooper, who passed away on January 28, 2011, at the age of 98. Dixie's estate consisted of Treasury bonds with a maturity value and fair market value of $1,400,000, $4,000 in her checking account, and $50,000 in a Certificate of Deposit with First State Bank of Springfield. Total accrued interest at the time of death was $44,000, made up of $2,000 from the CD and $42,000 from the bonds. Dixie left a valid will, which provided that most of her estate would be inherited by her two nephews, Jimmy Johns and Joey Johns. In addition, Dixie provided that $200,000 be transferred to a trust account for her faithful cats, Petra and Hobbes. Income from the trust would be used to care for Hobbes and Petra. Upon their passing, the remaining funds would then transfer to Operation Kindness, an organization that cares for cats and dogs. Mr. Lloyd will also serve as the fiduciary for the trust. He has determined that no state or federal inheritance taxes are due. The limited estate income is also free from any federal or state income tax. The following transactions occurred during February. 1. On February 3, Oscar sold the treasury bonds for $1,460,000. $1,400,000 was for the fair market value of the bonds, $42,000 was for interest accrued to the time of Dixie's death, and the remaining $18,000 was for accrued interest since Dixie's death. Estate income will be used to pay final medical expenses, and if anything is left, funeral expenses. 2. On February 11, Oscar issued a check to pay Dixie's final medical expenses of $11,900. 3. On February 15, Oscar received a check in the amount of $52,000 from First State Bank of Springfield. It is the maturity value and interest from a certificate of deposit in the amount of $50,000. The CD matured on January 22, 2011. 4. In Dixie's will, she wanted to give $150,000 to the American Humane Society. After examining the assets, Oscar determined that the estate's assets will adequately cover all expenses and specific devises, so on February 3, he issued a check to the organization for $150,000. 5. On February 18, Oscar transferred $200,000 to a trust account at First State Bank to fund the trust, to care for the cats. 6. On February 25, Oscar issued a check to pay Dixie's funeral expenses of $9,800. 7. On February 26, Oscar paid himself the $4,000 executor's fee specified in Dixie's will. 8. On February 28, Oscar finalized the estate and transferred the balance of the estate's assets equally between Dixie's nephews, Jimmy Johns and Joey Johns. Required:1. Prepare an inventory of estate assets at the time of Dixie's death and record the necessary journal entries to create the estate.2. Prepare journal entries to record the estate's transactions during February.

Q: On December 31, 2011, Potter Corporation has the following stockholders' equity:Common stock, $10 par $200,000Retained earnings 100,000Total stockholders' equity $300,000On January 1, 2012, Potter Corporation declared and issued a 10% stock dividend when the market price per share was $50.On January 2, 2012, Corrao Corporation purchased an 80% interest in Potter Corporation for $250,000 on the open market. On January 2, 2012, the fair value of Potter's individual assets and liabilities was equal to book value. Any excess cost over book value is attributed to goodwill.Required:Prepare the journal entry(ies) for Potter Corporation on January 1, 2012.Prepare the journal entry(ies) for Corrao Corporation on January 2, 2012.Prepare the elimination entry(ies) for consolidating work papers on January 2, 2012.Prepare the elimination entry(ies) for consolidating work papers on January 2, 2012 if the 10% stock dividend is not declared and issued on January 1, 2012.

Q: The partnership of May, Novem, and Octo was dissolved. By August 1, 2011, all assets had been converted into cash and all partnership liabilities were paid. The partnership balance sheet on August 1, 2011 (with partner residual profit and loss sharing percentages) was as follows: Cash $ 100,000 May, capital (30%) $ 8,000 Novem, capital (20%) (120,000) Octo, capital (50%) 212,000 Total assets $ 100,000 Total equity $ 100,000 The value of partners' personal assets and liabilities on August 1, 2011 were as follows: May Novem Octo Personal assets $ 148,000 $ 240,000 $ 112,000 Personal liabilities 144,000 160,000 120,000 Required: Prepare the final statement of partnership liquidation.

Q: The Vera, Wade, and Xena partnership was dissolved, and a cash distribution plan was developed, as follows: Priority Creditors Vera Wade Xena First $462,000 100% Next $173,000 60% 40% Next $240,000 7/12 5/12 Remainder 20% 30% 50% Required: If $1,000,000 of cash was distributed by the partnership, how much was received respectively by the priority creditors, Vera, Wade, and Xena?

Q: Which partner is considered the most vulnerable as a result of a computation of vulnerability rankings? A) The partner who has the lowest loss absorption potential B) The partner who has the highest loss absorption potential C) The partner with the highest capital account balance D) The partner with the lowest capital account balance

Q: A summary balance sheet for the partnership of Maddy, Nelson and Olsen on December 31, 2011 is shown below. Partners Maddy, Nelson and Olsen allocate profit and loss in their respective ratios of 9:6:10. Assets Cash $ 50,000 Marketable securities 120,000 Inventory 75,000 Land 80,000 Building-net 400,000 Total assets $725,000 Equities Maddy, capital $425,000 Nelson, capital 225,000 Olsen, capital 75,000 Total equities $725,000 The partners agree to admit Poosh for a one-tenth interest. The fair market value for partnership land is $180,000, and the fair market value of the inventory is $150,000. Required: 1. Record the entry to revalue the partnership assets prior to the admission of Poosh. 2. Calculate how much Poosh will have to invest to acquire a 10% interest. 3. Assume the partnership assets are not revalued. If Poosh paid $200,000 to the partnership in exchange for a 10% interest, what is the bonus that is allocated to each partner's capital account?

Q: The profit and loss sharing agreement for the Tuttle, Upman, and Veer partnership provides for residual profits and losses to be allocated 2:3:6 to Tuttle, Upman, and Veer, respectively. In 2011, the partnership recorded $11,000 of net income that was properly allocated to the partners' capital accounts. On January 18, 2012, after the books were closed for 2011, Tuttle discovered that the $16,500 payment for the partnership's liability and workers compensation insurance for 2012 was recorded as insurance expense when it was paid on December 28, 2011. Required: Prepare the necessary correcting entry(s) for the partnership.

Q: The profit and loss sharing agreement for the Mason, Nell, and Odell partnership provides for a $15,000 salary allowance to Nell. Residual profits and losses are allocated 5:3:2 to Mason, Nell, and Odell, respectively. In 2010, the partnership recorded $120,000 of net income that was properly allocated to the partners' capital accounts. On January 25, 2011, after the books were closed for 2010, Mason discovered that office equipment, purchased for $12,000 on December 29, 2010, was recorded as office expense by the company bookkeeper. Required: Prepare the necessary correcting entry(s) for the partnership.

Q: Dan and Ellie share partnership profits and losses at 70% and 30%, respectively. The partners agree to admit Fran into the partnership for a 50% interest in capital and earnings. Capital accounts immediately before the admission of Fran are: Dan (70%) $ 800,000 Ellie (30%) 400,000 Total $ 1,200,000 Required: 1. Prepare the journal entry(s) for the admission of Fran to the partnership assuming Fran invested $800,000 for the ownership interest, and that this is a fair price for that share of the partnership to be acquired. Fran paid the money directly to Dan and to Ellie for 50% of each of their respective capital interests. The partnership records goodwill. 2. Prepare the journal entry(s) for the admission of Fran to the partnership assuming Fran invested $1,000,000 for the ownership interest. Fran paid the money to the partnership for a 50% interest in capital and earnings. Assume the valuation is based on the capital of the current partnership, which is fairly valued. The partnership records goodwill. 3. Prepare the journal entry(s) for the admission of Fran to the partnership assuming Fran invested $1,400,000 for the ownership interest, and that this is a fair price for that share of the partnership to be acquired. Fran paid the money to the partnership for a 50% interest in capital and earnings. The partnership records goodwill.

Q: Use the following information to answer the question(s) below.Quincy has decided to retire from the partnership of Quincy, Robert, and Sam. The partnership will pay Quincy $400,000. Total partnership capital should be revalued based on the excess payment to Quincy. (Assume the book values of the assets listed below equals fair values.) A summary balance sheet for the Quincy, Robert, and Sam partnership appears below. Quincy, Robert, and Sam share profits and losses in a ratio of 1:1:3, respectively.AssetsCash $ 150,000Marketable securities 76,000Inventory 164,000Land 300,000Building-net 510,000Total assets $1,200,000EquitiesQuincy, capital 320,000Robert, capital 280,000Sam, capital 600,000Total equities $1,200,000What partnership capital will Robert have after Quincy retires?A) $200,000B) $280,000C) $360,000D) $440,000

Q: Mason Dixon dies on November 30, 2011, leaving a valid will. The will reads as follows:"I leave my boat to my son, George. I leave my automobile to my daughter, Georgia. I leave the income on my estate to be divided equally between George and Georgia. Estate expenses are to be paid from principal, not estate income. All other property, I leave to a trust to care for my wife, Gladys. Any remaining property at the time of her death is to be transferred into a trust to pay college education expenses of my grandchildren until such time as it is used up. I name my wife, Gladys, as executrix of my estate."Gladys prepares an estate inventory for all assets discovered and files the appropriate notice to potential creditors on December 15.Cash $ 90,000Investments 1,200,000Interest Receivable 2,000Life Insurance Receivable 500,000Residence 180,000Automobile 20,000Boat 70,000Total $2,062,000A check for interest is received of $5,000, and estate liabilities (such as funeral expenses, administrative costs, and taxes) are settled for $20,000. The will is administered.Required:Prepare a charge-discharge statement for the estate of Mason Dixon on December 31, 2011. Assume the life insurance proceeds have not been paid out.

Q: You are serving as the executor for the estate of Dr. Mary Carlson. The following transactions occur during August 2011. Dr. Carlson died on July 30, 2011. 1. On August 6, you received interest of $3,000 on State of Colorado general revenue bonds. Interest of $1,600 was earned after the date of death. The balance was earned prior to death, and had been accrued. The bonds were included in the estate's initial inventory. The maturity value and fair market values of the bond are $100,000. 2. On August 11, you issued a check to pay a probate court fee of $1,120. 3. The estate included 10,000 shares of Dasher International's common stock, valued at $40 per share, which were properly included in the estate's initial inventory. On the date of her death, there were no outstanding dividends receivable. On August 14, you read that a dividend of $1 per share was declared. 4. In Mary's will, she wanted $100,000 given to the National Zoo.After examining the assets, you determined that the estate's assets will adequately cover all expenses and specific devises, so on August 23, you issued a check to the Zoo for $100,000. 5. On August 25, you issued a check to pay Mary's final medical expenses of $16,700. 6. On August 28, you received a check for $10,000 for the common stock dividends paid by Dash International. Required:Prepare the necessary journal entries for the above transactions. You may ignore any estate or income taxes.

Q: John Doe's will states that all assets he had should be transferred to a trust to cover living expenses for his spouse, who he feels will not be able to handle her own financial affairs without advice and supervision. Upon his spouse's passing, the trust will be converted to cash and distributed to their only daughter, Jane. The probate court already ruled on which assets could be excluded from the estate, and all tax issues were addressed, leaving the following inventory of assets from the estate: AssetCostFair ValueCash206,000206,000Certificates of Deposit250,000250,000Investments/Mutual Funds354,1162,780,500Residence34,000190,000Ocean front cottage78,000560,000Pepper mill collection2,0703,900 Required:Prepare the journal entry for the creation of the trust.

Q: Avery died testate early in 2011. The following transactions occurred relating to Avery's estate.Avery's estate included bonds with a fair (market) value of $120,000. On the date of Avery's death, there was $2,000 of accrued but unpaid interest. Two months after Avery's death, a check arrived in the amount of $3,000, representing the normal semiannual interest payment.Avery's will stated a specific transfer to the Bird Sanctuary in the amount of $10,000. Avery's estate should be adequate to cover all obligations and devises, and the amount is paid.Funeral expenses amounted to $12,500.A bank statement is received from the First National Bank indicating a cash balance of $8,600. This bank account was not known or included on the estate inventory.Probate fees are paid to the court amounting to $900.Required:Prepare the journal entries for the listed transactions. Disregard the impact of estate and income taxes.

Q: In reference to estate principal and income, which of the following statements is correct?A) A primary reason for dividing estate principal and estate income is that the beneficiaries are often different.B) In accounting for the decedent's estate, the receipts earned but not yet received at the date of death are considered estate income.C) After death, earnings from income-producing property owned at the time of death are considered estate principal.D) Expenses incurred after death to administer the estate are first charged against income earned after death.

Q: Under the Uniform Probate Code, the personal representative must publish for what time period a notice in a newspaper of general circulation in the county in which the decedent resided?A) For one weekB) For two weeksC) For three weeksD) For five weeks

Q: The executor or administrator of a will is required to prepare and file an inventory of property owned by the deceased within what time period?A) One month of appointmentB) Two months of appointmentC) Three months of appointmentD) 45 days of appointment

Q: Which of the following is a gift of an object to a devisee?A) A general deviseB) A specific deviseC) A testamentary allocationD) An administrative devise

Q: In reference to the probate process, which of the following statements is correct?A) The personal representative of the deceased can file a petition with the appropriate probate court requesting that an existing will be probated.B) The Uniform Probate Code varies from state to state.C) The Uniform Probate Code is applied to all wills found to be valid, and to wills found to be invalid in probate court.D) The Uniform Probate Code is applied to all wills found to be valid, but not to wills found to be invalid in probate court.

Q: Which of the following phrases is frequently used to refer to estate or trust accounting?A) Non-profit accountingB) Testamentary accountingC) Fiduciary accountingD) All of the above phrases are used to refer to estate or trust accounting.

Q: Prepare journal entries to record the following transactions for a private, not-for-profit university. 1. Tuition and fees assessed total $10,000,000, 80% of which was collected by year-end; tuition scholarships were granted for $1,300,000, and $650,000 was expected to be uncollectible. 2. Revenues collected from sales and services by the university bookstore were $1,450,000. 3. Salaries and wages paid were $5,600,000, $300,000 of which was for employees of the university bookstore. 4. Financial aid funds of $700,000 were received from the Pell Grant program; the funds were then disbursed to the appropriate students. 5. Contributions of $600,000 were received; $30,000 was restricted for the athletic department and the balance was unrestricted. An additional $70,000 was pledged to the athletic department by the alumni. 6. Athletic equipment was purchased with $42,000 previously set aside for that purpose.

Q: Marshfield Hospital is a private, not-for-profit hospital. The following transactions occurred: 1. Unrestricted cash gifts that were received last year, but designated for use in the current year, totaled $180,000. The cash gifts were used in the current year in accordance with restrictions. 2. Unrestricted pledges of $800,000 were received. Ten percent of the pledges typically prove uncollectible. Additional cash contributions during the year totaled $300,000. 3. Gifts in kind were received that were sold at a silent auction for $23,000. The fair value of the donated gifts in kind could not be reasonably determined. 4. Expenses were incurred and paid as follows: Salary of doctor, $190,000; facility rental, $36,000; purchases of supplies, $8,000; and utility costs, $10,000. 5. Marketable securities with a fair value of $650,000 were received as a donation with a stipulation that the hospital use the funds to purchase suitable land for the hospital. Required:Prepare journal entries for the aforementioned transactions.

Q: Carousel Clothes is a voluntary health and welfare organization that provides gently-used second-hand clothes to those in need. They had the following transactions in 2011.1. Cash gifts were received in the amount of $60,000, of which $13,000 had been pledged in the prior year. 2. Pledges made in the current year but not yet fulfilled amounted to $39,000. Ten percent of the pledges typically prove to be uncollectible. Pledges are made for 2011. 3. An office supply company donates office furniture to the VHWO. The fair value of the furniture is $40,000. No restrictions were placed on the donation. 4. The following expenses were incurred and paid: director's salary, $15,000; facility rental, $18,000; cleaning and repair costs for clothes, $29,000; and purchase of supplies consumed in tagging and distribution of clothes, $5,000. The director's salary is categorized as Support Services and the rest of the costs are Program Services. 5. Restricted pledges were received during the year for $450,000. The pledges are restricted for the construction of a new facility.Required:Prepare the journal entries for Carousel for 2011.

Q: Albatross University, a not-for-profit, nongovernmental university, had the following transactions in 2011. 1. Tuition bills were sent amounting to $8,000,000, with 70% collected before the end of the fiscal year; tuition waivers were granted on the total amount of $400,000, and $220,000 was expected to be uncollectible. 2. Cafeteria sales, all cash, were $1,400,000. 3. Salaries and wages were paid amounting to $5,500,000, of which $370,000 was for cafeteria staff. 4. Long-term debt payments were made from general funds amounting to $800,000, of which $130,000 was for interest. 5. Equipment was purchased for the engineering department with funds previously set aside for that purpose, amounting to $180,000. Required:Prepare the journal entries for 2011 for Albatross University.

Q: In a not-for-profit, private university, the federal grant funds given directly to students for financial aid are an example ofA) a bequest.B) an agency transaction.C) unrestricted revenue.D) a restricted contribution.

Q: For nonprofit, nongovernmental organizations, unconditional promises to give that include promises of payments due in future periods (next year or later) are reported asA) unrestricted revenues.B) unrestricted support.C) deferred revenues until payment is received.D) restricted revenues.

Q: For a Voluntary Health and Welfare Organization, what entry is prepared when the restriction on a cash donation is met?A) Debit Unrestricted Net Assets, Credit Restricted Net AssetsB) Debit Unrestricted Fund Balance, Credit Restricted Fund BalanceC) Debit Restricted Fund Balance, Credit Unrestricted Fund BalanceD) Debit Temporarily Restricted Net Assets - Reclassifications out, Credit Unrestricted Net Assets - Reclassifications in

Q: The accounting equation for the enterprise fund isA) assets = liabilities.B) current assets + current liabilities = fund balance.C) current assets - current liabilities = net assets.D) current assets + noncurrent assets - current liabilities - noncurrent liabilities = net assets.

Q: Static City started a department to provide copy, printing and mailing services for all departments and agencies of the city.During the fiscal year from July 1, 2010 through June 30, 2011, the copy services department had the following transactions:1. Paper and toner inventory was purchased for $58,000, on account.2. The paper and toner inventory physical count showed only $8,000 on hand at June 30, 2011.3. The department billed other departments for services rendered to them amounting to: General Fund, $43,000; Enterprise Fund, $24,000; Debt Service Fund, $21,000; and Trust Fund, $16,000. All receivables were collected with the exception of $6,000 from the Trust Fund which is expected to be collected in July, 2011.4. The department incurred and paid the following expenses: salaries and wages, $23,000; Electric, $8,000; Other operating expenses, $6,000. Also, $63,000 of the Accounts Payable were paid during the year.5. Depreciation Expense on Equipment amounted to $6,000 for the year ending June 30, 2011.6. The department prepared the closing entry on June 30, 2011.Required:For the fiscal year ended June 30, 2011, prepare the journal entries to record the transactions for the Internal Service Fund.

Q: The City of Sill established an Internal Service Fund to provide cleaning services to all city offices and departments. The following transactions took place with respect to this event.1. The General Fund contributed cash of $49,000 to the Internal Service Fund. The General Fund provided a $10,000 loan to the Internal Service Fund.2. On January 1, 2011, the Internal Service Fund acquired a floor waxing machine for cash of $5,000. It has a 5 year life with no salvage value, and the city uses straight-line depreciation on their assets 3. The cleaning services department billed other government agencies and departments $226,000 and collected $187,000.4. The cleaning services department incurred and paid the following expenses: cleaning personnel wages, $65,000; payroll taxes, $10,000; cleaning supplies, $13,000; and office rental and utilities, $77,000. The cleaning services department also repaid the general fund for the loan.5. The cleaning services department prepared the journal entry to depreciate their assets for the year ending December 31, 2011.Required:Prepare the necessary journal entries for each of the above transactions for the Internal Service Fund.