Q&A Hero

Q: Match each of the following fund types to one of the following three fund categories as indicated. Each fund category may be used more than once.A. Governmental FundB. Proprietary FundC. Fiduciary Fund_____1. Debt Service Fund_____2. Internal Service Fund_____3. Agency Fund_____4. General Fund_____5. Permanent Fund_____6. Enterprise Fund_____7. Capital Projects Fund_____8. Trust Fund_____9. Special Revenue Fund_____10. Pension Fund

Q: Government-wide financial statements exclude theA) general fund.B) fiduciary funds.C) proprietary funds.D) special revenue funds.

Q: A comprehensive annual financial report has the following three major sections:A) introductory, financial, and management's discussion and analysis.B) introductory, financial, and statistical.C) transmittal, financial, and statistical.D) transmittal, financial, and management's discussion and analysis.

Q: Government-wide financial statements include aA) balance sheet, an income statement, and a statement of cash flows.B) statement of net assets, a statement of activities, and a statement of cash flows.C) statement of net assets and a statement of activities.D) statement of activities and a statement of cash flows.

Q: What basis of accounting is used to prepare Government-wide financial statements?A) Modified accrual basisB) Accrual basisC) Cash basisD) Fiduciary basis

Q: What funds are reported in Government-wide financial statements?A) Governmental onlyB) Proprietary onlyC) Governmental and proprietaryD) Governmental, proprietary and fiduciary

Q: The accounting equation for a governmental fund isA) Assets = Liabilities + Equity.B) Current assets + Noncurrent assets - Current liabilities - Noncurrent liabilities = Net assets.C) Current assets - Current liabilities = Fund Balance.D) Assets = Liabilities + Fund Balance.

Q: The accounting equation for an agency fund isA) Current assets - Current liabilities = Fund Balance.B) Assets - Liabilities = Equity.C) Assets = Equity + Liabilities.D) Assets = Liabilities.

Q: The modified accrual basis of accounting is used forA) governmental funds.B) proprietary funds.C) internal service funds.D) both A and C.

Q: Centralized data processing, central motor pools and garages, centralized risk-financing activities, and central stores typically would be accounted for using what type of fund?A) An agency fundB) An enterprise fundC) An internal service fundD) A trust fund

Q: Which type of fund is used to account for a government activity that sells goods or services either solely or almost solely to external customers?A) A temporary fundB) A general fundC) An agency fundD) An enterprise fund

Q: Which fund would most likely report depreciation expense?A) A special revenue fundB) An enterprise fundC) A capital projects fundD) A debt service fund

Q: When examining revenue transactions, which of the following transactions is classified as an exchange transaction?A) When a homeowner pays property taxesB) When a university receives a federal grant that mandates a certain type of research activityC) When an aquatic center receives cash for a group swimD) When an employer deducts money for state tax withholding

Q: Under the modified accrual basis of accounting, revenues are recognized in the periodA) when the relevant service is done.B) when they are collected.C) when the paying entity is billed.D) when they become both measurable and available.

Q: Internal Service Funds differ from Enterprise Funds because Internal Service FundsA) are a proprietary fund.B) are intended to show a profit.C) charge for their services.D) provide goods and services primarily to other government agencies.

Q: Because a fund is an accounting entity, each fund hasI. its own accounting equation.II. its own journals, ledgers, and other accounting records.III. its own separate auditor.A) I onlyB) II onlyC) I and IID) I, II and III

Q: Approved or authorized expenditures that provide legislative control over the expenditure budget are referred to asA) appropriations.B) allotments.C) allocations.D) encumbrances

Q: Governmental accounting differs from corporate financial accounting primarily becauseA) the size of the government and the various levels would make it unreasonable to use corporate GAAP.B) governments lack a profit motive and must focus on accountability to the public they serve.C) the government has no stakeholders who require financial reporting.D) the government has too many types of organizations to use one type of corporate GAAP.

Q: Governmental fund financial statements are prepared on the ________ basis of accounting. Proprietary fund financial statements are prepared on the ________ basis of accounting.A) modified accrual; modified accrualB) accrual; fundC) modified accrual; accrualD) blended; discrete

Q: The key focus of government fund accounting concernsA) capital expenditures.B) intergovernmental transfers from the general fund.C) income measurement.D) the current ability to provide and fund services and goods.

Q: Which pronouncements have the highest level of authority for state and local governments?A) Financial Accounting Standards Board StatementsB) GASB StatementsC) Consensus Positions of GASB Emerging Issues Task ForceD) GASB Technical Bulletins

Q: Ohio Corporation is being liquidated under Chapter 7 of the Bankruptcy Act. The trustee has determined that the unsecured claims will receive $.05 on the dollar. Lender Bank holds a $100,000 mortgage note receivable from Ohio that is secured by equipment with a $120,000 book value and a $90,000 fair value, and a second mortgage on the same equipment amounting to $50,000. Required:How much of the mortgage receivable will be recovered by Lender?

Q: Hilfmir Corporation filed for Chapter 11 bankruptcy on January 1, 2011. A summary of their financial status is shown below on June 30, 2011, at the date of the approved reorganization, along with the fair value of their assets.Per Books Fair ValueCash $ 134,000 $ 134,000A/R - net 20,000 20,000Inventory 32,000 40,000Plant Assets - net 114,000 106,000Patent 80,000 0$ 380,000A/P $ 60,000Wages Payable 20,000Prepetition liab. 250,000Common Stock 140,000Deficit (90,000)$ 380,000Under the reorganization plan, the reorganization value has been set at $320,000. Prepetition liabilities include $30,000 of trade Accounts Payable and a $220,000 Note Payable to Bigg Bank. The reorganization plan calls for the Prepetition accounts payable to be paid at 80% at a later date, and the Note Payable for $220,000 to be replaced by a Note Payable for $76,000 and the issuance of common stock of the new entity for $100,000. The former stockholders will receive $40,000 in common stock of the new entity, Hilfmir, in exchange for their shares.Required:Show the calculations to determine if Hilfmir is eligible for fresh-start accounting, and prepare a fresh-start balance sheet for the new entity, Hilfmir, as of July 1, 2011.

Q: Pasten Corporation is liquidating under Chapter 7 of the Bankruptcy Act. The accounts of Pasten at the time of filing are summarized as follows:EstimatedRealizableBook Value ValueCash $ 65,000 $ 65,000Accounts receivable-net 15,000 13,000Inventory 280,000 190,000Land 20,000 28,000Building 210,000 220,000Goodwill 595,000 0$ 1,185,000Accounts payable $ 800,000Wages and salaries 21,000Taxes payable 12,000Accrued mortgage interest payable 16,000Mortgage payable 304,000Capital stock 100,000Deficit (68,000)$ 1,185,000The land and building are pledged as security for the mortgage payable as well as any accrued interest on the mortgage. Wages and salaries were earned within 90 days of filing the bankruptcy petition and do not exceed $10,000 per employee. Liquidation expenses are expected to be $35,000.Required:1. Prepare a schedule showing the priority rankings of the creditors and the expected payouts.2. Yuomi Corporation was a supplier to Pasten Corporation and at the time of Pasten's bankruptcy filing, Yuomi's account receivable from Pasten was $500,000. On the basis of the estimates, how much can Yuomi expect to receive?

Q: Oceana Corporation is being liquidated under Chapter 7 of the Bankruptcy Act. The trustee has determined that the unsecured claims will receive $.35 on the dollar. Loans-R-Us holds a $1,000,000 mortgage note receivable from Oceana that is secured by building and equipment with a $1,200,000 book value and a $900,000 fair value. Required:How much of the mortgage receivable will Loans-R-Us recover?

Q: Rank the following claims 1 through 5, with 1 being the first priority claim, under Chapter 7 of the bankruptcy code._____ A. Trustee fees for administration of the estate._____ B. Accounts payable for goods delivered prior to filing an involuntary petition for bankruptcy_____ C. Customer deposits for services never rendered._____ D. First mortgage on the company's real estate._____ E. Income taxes owed for the prior year.

Q: Aqua Corporation filed a petition under Chapter 7 of the bankruptcy act in January, 2011. On February 28, the following information was presented regarding Aqua's financial status.Book Values Fair ValuesCash $ 50,000 $ 50,000A/R - net 100,000 90,000Inventories 80,000 60,000Fixed Assets - net 200,000 230,000Priority Claims 80,000A/P 100,000N/P 110,000Mortgage Payable 200,000The Note Payable is secured by Accounts Receivable, and the Mortgage Payable is secured by the Fixed Assets.Required:Calculate the amount expected to be available for unsecured claims and the percentage recovery that the unsecured class should expect to receive.

Q: Gargantuan Bank has loaned money in two separate loans to Little Company, which is now in Chapter 7 bankruptcy. Little Company has the following assets and liabilities, stated at fair value in liquidation.Assets pledged with secured creditors $ 190,000Assets pledged with partially secured creditors 70,000Other assets 30,000Secured debt to Gargantuan 130,000Partially secured debt to Gargantuan 110,000Unsecured liabilities with priority 50,000Unsecured liabilities 160,000Required:Determine the amount of cash that Gargantuan will collect from these two pieces of debt.

Q: Faled Company has the following assets and liabilities, stated at fair value in liquidation.Assets pledged with secured creditors $ 100,000Assets pledged with partially secured creditors 75,000Other assets 160,000Secured liabilities 50,000Partially secured liabilities 110,000Unsecured liabilities with priority 80,000Unsecured liabilities 215,000Required:Determine the amount of cash that will be available to pay unsecured creditors, and the percentage of unsecured liabilities that will be paid.

Q: Dip Corporation is in a Chapter 11 bankruptcy reorganization. For each of the following transactions relating to the reorganization, show the journal entry that would be required by Dip. Assume that all unsecured liabilities were not reclassified to Prepetition Claims Subject to Compromise.Dip has $200,000 in bonds payable which mature at the end of the current year. The bondholders agree to accept $100,000 of new common stock and $75,000 cash, payable immediately.2. Accrued interest on the bonds recorded at $20,000 will not be paid.3. Recorded patents in the amount of $15,000 are determined to be worthless and are written off.4. Equipment recorded net at $24,000 is appraised at $30,000.5. A building recorded net at $78,000 is appraised for $87,000.6. Creditors owed $120,000 recorded in accounts payable are paid $96,000 in full settlement.7. Property taxes and payroll taxes withheld are paid in full at $12,000.8. A capital lease recorded at $48,000 is re-negotiated, and the resulting operating lease will require monthly lease payments of $500.9. An unsecured bank note amounting to $180,000 will be exchanged for $120,000 note secured by the building and equipment.10. Current stockholders will exchange their stock which has a current book value of $300,000 for $100,000 common stock of the new entity.

Q: Trustin Corporation is in a Chapter 7 bankruptcy liquidation. For each of the following transactions, show the journal entry that would be required by the trustee of the estate.1. An electric bill is received for $1,000 which had not yet been recorded by Trustin.2. Inventory recorded net at $18,000 is sold for $16,000 cash.3. Recorded patents in the amount of $7,000 are determined to be worthless and are written off.4. Equipment recorded net at $24,000 is sold for $20,000 cash.5. A building recorded net at $78,000 is sold for $87,000 cash.6. Trustee fees of $2,500 are accrued.7. The fully secured mortgage is paid in the amount of $70,000.8. Wages payable that were recorded in the amount of $9,000 are paid.9. An equipment lease, which was recorded as prepaid equipment lease, is cancelled and a $1,500 refund is received.10. Accounts receivable amounting to $12,000 are collected, and an additional $3,000 is determined to be uncollectible.

Q: DeFunk Corporation is being liquidated under Chapter 7 of the Bankruptcy Act. The trustee has determined that the unsecured claims will receive $.18 on the dollar. Magma Corporation holds a $200,000 mortgage receivable from DeFunk that is secured by the land and buildings with a book value of $180,000 and a fair value of $190,000. Magma also holds an $80,000 unsecured note receivable from Defunk. Mortgage interest owed, which is secured with the mortgage note, is $4,000. Note interest owed, which is unsecured, is $2,000.Required:How much of the amounts owed will Magma recover?

Q: Moddle Corporation is being liquidated under Chapter 7 of the Bankruptcy Act. The trustee has determined that the unsecured claims will receive $.20 on the dollar. National Corporation holds a $500,000 mortgage note receivable from Moddle that is secured by equipment with a $550,000 book value and a $430,000 fair value.Required:How much of the mortgage receivable will National recover?

Q: Lesher Corporation lost their primary contract and entered into voluntary Chapter 7 bankruptcy in the early part of 2012. By July 1, all assets were converted into cash, the secured creditors were paid, and $124,500 in cash was left to pay the remaining claims as follows:Accounts payable $ 50,000Claims incurred between the date of filing an involuntarybankruptcy petition and the date an interim trustee is appointed 8,000Payroll taxes withheld 14,000Wages payable (all under $10,000 per employee; earned within90 days of filing bankruptcy petition) 56,000Unsecured note payable 37,500Accrued interest on the note payable 2,000Administrative expenses of the trustee 22,000Total $ 189,500Required:Classify the claims by their Chapter 7 priority ranking, and analyze which amounts will be paid and which amounts will be written off.

Q: Kline Corporation incurred major losses in 2011 and entered into voluntary Chapter 7 bankruptcy in the early part of 2012. By July 1, all assets were converted into cash, the secured creditors were paid, and $122,700 in cash was left to pay the remaining claims as follows:Accounts payable $ 37,000Claims incurred between the date of filing an involuntary 5,000petition and the date an interim trustee is appointedProperty taxes payable 8,000Wages payable (all under $10,000 per employee; 74,000earned within 90 days of filing bankruptcy petition)Unsecured note payable 19,000Accrued interest on the note payable 2,000Administrative expenses of the trustee 12,180Total $ 157,180Required:Classify the claims by their Chapter 7 priority ranking, and analyze which amounts will be paid and which amounts will be written off.

Q: Gonne Corporation is being liquidated under Chapter 7 of the Bankruptcy Act. The trustee has determined that the unsecured claims will receive $.35 on the dollar. Odemay Corporation holds a $100,000 mortgage note receivable from Gonne that is secured by equipment with a $120,000 book value and a $75,000 fair value.Required:How much of the mortgage receivable will be recovered by Odemay?

Q: Finale Company is in bankruptcy and is being liquidated under the provisions of Chapter 7 of the bankruptcy code. The trustee has converted all assets into $180,000 cash and has prepared the following list of approved claims:Customer deposits ($1,000 from each of three customersthat ordered products that were never delivered) $ 3,000Property taxes payable 6,000Accounts payable, unsecured 45,000Trustee's fees and other costs of liquidation 24,000Mortgage payable, secured by property that was sold for $120,000 90,000Note payable to bank, secured by all accounts receivable of which $45,000were collected and $15,000 were written off as uncollectible 60,000Required:How much will the bank receive on the note payable?

Q: Ending Company is in bankruptcy and is being liquidated under the provisions of Chapter 7 of the bankruptcy code. The trustee has converted all assets into $80,000 cash (which includes the amounts shown below for assets sold) and has prepared the following list of approved claims:Property taxes payable $ 10,000Accounts payable, unsecured 30,000Mortgage payable, secured by property that was sold for $50,000 30,000Note payable to bank, secured by all accounts receivable of which $20,000was able to be collected and the balance was written off 30,000Required:How much will the bank receive on the note payable?

Q: CommTex Corporation is liquidating under Chapter 7 of the Bankruptcy Act. The accounts of CommTex at the time of filing are summarized as follows:EstimatedRealizableBook Value ValueCash $ 80,000 $ 80,000Accounts receivable-net 50,000 40,000Inventory 80,000 60,000Land 10,000 20,000Building-net 150,000 110,000Equipment-net 60,000 40,000Goodwill 10,000 0$ 440,000Accounts payable $ 120,000Wages and salaries 20,000Contributions due to pension plan 10,000Taxes payable 60,000Accrued interest payable (includes 10,000$8,000 from the mortgage payable and$2,000 from the note payable)Note payable 120,000Mortgage payable 90,000Capital stock 80,000Deficit (70,000)$ 440,000The land and building are pledged as security for the mortgage payable as well as any accrued interest on the mortgage. The note payable is secured with the equipment, but the interest on the note is unsecured. Wages and salaries were earned within 90 days of filing the petition for bankruptcy and pension plan contributions relate to services rendered within 6 months of filing the petition for bankruptcy; neither exceeds $4,000 per employee. Liquidation expenses are expected to be $40,000.Required:Required:1. Prepare a schedule showing the priority rankings of the creditors and the expected payouts.2. Devendor Corporation was a supplier to CommTex Corporation and at the time of CommTex's bankruptcy filing, Devendor's account receivable from CommTex was $25,000. On the basis of the estimates, how much can Devendor expect to receive?

Q: Alitech Corporation is liquidating under Chapter 7 of the Bankruptcy Act. The accounts of Alitech at the time of filing are summarized as follows:EstimatedRealizableBook Value ValueCash $ 10,000 $ 10,000Accounts receivable-net 60,000 50,000Inventory 110,000 65,000Land 20,000 35,000Building 200,000 126,000Goodwill 22,000$ 422,000Accounts payable $ 120,000Wages and salaries 30,000Taxes payable 80,000Accrued mortgage interest payable 22,000Mortgage payable 100,000Capital stock 90,000Deficit (20,000)$ 422,000The land and building are pledged as security for the mortgage payable as well as any accrued interest on the mortgage. Wages and salaries were earned within 90 days of filing the petition for bankruptcy and do not exceed $10,000 per employee. Liquidation expenses are expected to be $30,000.Required:1. Prepare a schedule showing the priority rankings of the creditors and the expected payouts.2. Billing Corporation was a supplier to Alitech Corporation and at the time of Alitech's bankruptcy filing, Billing's account receivable from Alitech was $40,000. On the basis of the estimates, how much can Billing expect to receive?

Q: Rank the following claims of an organization filing Chapter 7 bankruptcy from 1 to 4 based on the following classifications. Each classification may be used more than once.1. Secured Claims2. Unsecured Priority Claims3. Unsecured Nonpriority Claims4. Stockholders' Claims_____ A. Claims for wages that are less than $10,000 per individual, earned within 90 days of filing petition for bankruptcy._____ C. Claim by the accounting firm for the audit fee from the prior year-end audit completed two months prior to the bankruptcy filing._____ D. Claims for employee benefit plan contributions that are less than $10,000 per individual and relating to services rendered within 180 days of bankruptcy filing._____ E. Claims with a valid lien against assets of the entity._____ F. Claim by employee for commissions earned in 90 days prior to filing bankruptcy petition, for the portion in excess of $10,000._____ G. Administrative expenses of the estate, such as trustee fees._____ H. Claim by a supplier for goods delivered on account._____ I. Interest on unsecured claims._____ J. Taxes owed to a government unit.

Q: Which of the following statements is correct concerning companies emerging from reorganization under Chapter 11 when they do not qualify for fresh start accounting? The forgiveness of debt is reported asA) an operating gain.B) a non-operating gain.C) an extraordinary item.D) an increase in contributed capital.

Q: An entity which qualified for fresh-start accounting is not required to disclose which of the following items in their initial financial statements?A) Adjustments from historical cost of assets and liabilitiesB) Amount of debt of the prior entity forgivenC) Amount of ending retained earnings/deficit of the prior entityD) Changes to the management team from the prior entity

Q: Fresh-start reporting results inA) a new reporting entity with no retained earnings/deficit balance.B) a new reporting entity with a retained earnings/deficit balance equal to the reorganization value.C) a continuation of the reorganized organization with no retained earnings/deficit balance.D) a continuation of the reorganized organization with a retained earnings/deficit balance equal to the reorganization value.

Q: In a Chapter 11 case, the debtor corporation filing the petition may continue in possession of the corporation's property, and is referred to as a(n)A) examiner.B) trustee.C) liquidator.D) debtor in possession.

Q: A company emerging from bankruptcy will have a reorganization value thatA) approximates the book value of the entity's assets prior to bankruptcy.B) approximates the book value of the entity prior to bankruptcy.C) approximates the fair market value of the entity without considering liabilities.D) approximates the fair market value of the entity's liabilities.

Q: Which condition must be met for fresh-start reporting for an emerging company from Chapter 11?A) Holders of existing voting shares immediately before confirmation of the reorganization plan must receive more than fifty percent of the emerging entity.B) The loss of control by voting shareholders must be temporary.C) The reorganization value of the emerging entity's assets immediately before the date of the confirmation of the reorganization plan must be less than the total of all postpetition liabilities and allowed claims.D) The fresh-start entity must have a deficit.

Q: What is an advantage of filing a Chapter 11 petition?A) The continuation of interest accrual on liabilitiesB) Restrictions imposed by the bankruptcy court on day-to-day transactionsC) It is less costly than filing Chapter 7.D) The opportunity to cancel unfavorable contracts

Q: Which of the following does not occur for a trustee in a Chapter 7 bankruptcy case?A) Gains and losses on the sale of assets are debited to the estate equity account.B) Unrecorded liabilities discovered by the trustee are debited to the estate equity account and credited to the liability account.C) Liquidation expenses are debited to the estate equity account.D) An income statement is prepared showing gains and losses on sale of assets.

Q: In a Chapter 7 bankruptcy case, what is the first-to-last ranking order of priority for payment? (Use the following list of claim types.)I. stockholder claimsII. unsecured priority claimsIII. secured claimsIV. unsecured nonpriority claimsA) I, II, IV, and IIIB) III, II, IV, and IC) III, I, IV, and IID) II, IV, III, and I

Q: Creditor committees are electedA) in all bankruptcy cases.B) in Chapter 7 cases.C) only in bankruptcy cases arising from involuntary petitions.D) in Chapter 11 cases.

Q: A primary difference between voluntary and involuntary bankruptcy petitions is thatA) creditors file the petition in an involuntary filing.B) trustees are not used in an voluntary filing.C) voluntary petitions are not subject to review by the bankruptcy court.D) the debtor corporation files the petition in an involuntary filing.

Q: A petition commencing a case against a corporate debtorA) can be filed only under Chapter 7 of the bankruptcy act.B) can be filed only under Chapter 11 of the bankruptcy act.C) can be filed under either Chapter 7 or Chapter 11 of the bankruptcy act.D) will be determined by the trustee whether it shall be Chapter 7 or Chapter 11 of the bankruptcy act.

Q: A single creditorA) can never file a petition for bankruptcy.B) with a $12,300 or more secured claim may file a petition for bankruptcy.C) with a $12,300 or more unsecured claim may file a petition for bankruptcy, if there are fewer than 12 unsecured creditors.D) with a $12,300 or more unsecured claim may file a petition for bankruptcy if there are more than 12 unsecured creditors.

Q: In a liquidation under Chapter 7, the trusteeA) may not be appointed, but may only be elected.B) may not be elected, but may only be appointed.C) is responsible for converting assets to cash and distributing payments to claimants.D) is responsible for appointing a creditors' committee.

Q: Chapter 7 bankruptcy cases differ from Chapter 11 bankruptcy cases because Chapter 7 bankruptcyA) is involuntary.B) requires a reorganization plan that is approved by the court.C) requires the debtor corporation to file a list of creditors, schedule of assets and liabilities, and work with a trustee.D) leads to full liquidation of the bankrupt company.

Q: The duties of a debtor in possession in a Chapter 11 bankruptcy case do not includeA) filing a list of creditors and schedules of assets and liabilities with the bankruptcy court.B) operating the business during the reorganization period.C) filing a reorganization plan.D) issuing an order of relief.

Q: A bankruptcy petition filed by a firm's creditors isA) a Chapter 2 petition.B) a petition for liquidation.C) an involuntary petition.D) a voluntary petition.

Q: When a corporation's total liabilities are greater than the fair value of total assets, the firm isA) a distressed corporation.B) a bankrupt corporation.C) insolvent in the equity sense.D) insolvent in the bankruptcy sense.

Q: Which of the following must approve a Chapter 11 plan?A) The organization's management and the assigned trusteeB) The assigned trustee and creditorsC) The assigned trustee and entity's stockholdersD) The bankruptcy court and the creditors

Q: When the bankruptcy court grants an order for relief under Chapter 7,A) creditors may not seek payment for their claims directly from the debtor corporation.B) the reorganization plan was accepted by creditors having at least one-half of the total number of claims and the claims represent at least two-thirds of the total amount owed.C) the bankruptcy court confirms that the reorganization plan is fair and equitable to creditors.D) the court discharges the debtor except for those claims provided for in the reorganization plan.

Q: The year-end balance sheet and residual profit and loss sharing percentages for the Gary, Harold, and Ivan partnership on December 31, 2011, are as follows: Cash $ 60,000 Accounts payable $ 150,000 Loan to Gary 50,000 Loan from Harold 50,000 Other assets 360,000 Gary, capital (25%) 70,000 Harold, capital (25%) 80,000 Ivan, capital (50%) 120,000 Total assets $ 470,000 Total liab./equity $ 470,000 The partners agree to liquidate the business and distribute cash when it becomes available. A cash distribution plan is developed with vulnerability rankings for the Gary, Harold and Ivan partnership. After outside creditors are paid, the cash available will initially go to A) Gary in the amount of $20,000. B) Harold in the amount of $50,000. C) Harold in the amount of $70,000. D) Ivan in the amount of $40,000.

Q: If all partners are included in the first installment of an installment liquidation, then in future installments A) cash will be distributed according to the residual profit and loss sharing ratios. B) cash should not be distributed until all non-cash assets are converted into cash. C) vulnerability rankings for each partner should be prepared. D) a cash distribution plan must be prepared so that partners will know when they will be included in cash distributions.

Q: In partnership liquidations, what are safe payments? A) The amounts of distributions that can be made to the partners, after all creditors have been paid in full. B) The amounts of distributions that can be made to the partners with assurance that such amounts will not have to be returned to the partnership. C) The amounts of distributions that can be made to the partners, after all non-cash assets have been adjusted to fair market value. D) The amounts of distributions that can be made to the partners during the liquidation based on the partner's contributed capital return.

Q: What is the proper disposition of a partnership loan that was made from a partner who has a debit balance in the capital account? A) The loan is ignored in liquidation. B) The loan is offset against the debit balance in the capital account. C) The loan is charged off to the capital accounts of all the partners in their profit and loss sharing ratios. D) The loan is held for payment after all other capital accounts are covered.

Q: Que, Rae, and Sye are in the process of liquidating their partnership. Sye has agreed to accept the inventory, which has a fair value of $60,000, as part of her settlement. A balance sheet and the residual profit and loss sharing percentages are as follows: Cash $ 248,000 Accounts payable $ 180,000 Inventory 100,000 Que, capital (40%) 98,000 Plant assets 280,000 Rae, capital (40%) 175,000 Sye, capital (20%) 175,000 Total assets $ 628,000 Total liab./equity $ 628,000 If the partners then distribute the available cash using a safe payments schedule, Sye will receive A) $ 41,000 cash. B) $ 51,000 cash. C) $107,000 cash. D) $175,000 cash.

Q: Use the following information to answer the question(s) below.Lola, Melvin, and Nettie are in the process of liquidating their partnership. Since it may take several months to convert the other assets into cash, the partners agree to distribute all available cash immediately, except for $12,000 that is set aside for contingent expenses. The balance sheet and residual profit and loss sharing percentages are as follows:Cash $ 500,000 Accounts payable $ 225,000Other assets 225,000 Lola, capital (20%) 168,000Melvin, capital (30%) 270,000Nettie, capital (50%) 62,000Total assets $ 725,000 Total liab./equity $ 725,000Using a safe payment schedule, how much cash should Lola receive in the first distribution?A) $ 81,000B) $ 98,000C) $168,600D) $202,500

Q: Use the following information to answer the question(s) below.On June 30, 2011, the Able, Baker, and Charlie partnership had the following fiscal year-end balance sheet:Cash $ 8,000 Accounts payable $ 14,000Accounts receivable 12,000 Loan from Charlie 10,000Inventory 28,000 Able, capital (20%) 28,000Plant assets-net 24,000 Baker, capital (20%) 20,000Loan to Able 12,000 Charlie,capital (60%) 12,000Total assets $ 84,000 Total liab./equity $ 84,000The percentages shown are the residual profit and loss sharing ratios. The partners dissolved the partnership on July 1, 2011, and began the liquidation process. During July the following events occurred:* Receivables of $6,000 were collected.* All inventory was sold for $8,000.* All available cash was distributed on July 31, except for$4,000 that was set aside for contingent expenses.How much cash would Able receive from the cash that is available for distribution on July 31? (Assume a safe payments schedule is used.)A) $ 0B) $ 800C) $2,400D) $4,000

Q: If conditions produce a debit balance in a partner's capital account when liquidation losses are allocated, then A) the partner receives further allocations of liquidation losses, but not gains. B) the partner receives further allocations of liquidation gains, but not losses. C) the partner is no longer obligated to partnership creditors. D) the partner has an obligation of personal net assets to the other partners.

Q: A simple partnership liquidation requires A) periodic payments to creditors and partners determined by a safe payments schedule. B) partnership assets to be converted into cash with full payment made to all outside creditors before remaining cash is distributed to partners. C) only creditors to be paid in an orderly manner. D) periodic payments to partners as cash becomes available.

Q: In partnership liquidation, how are partner salary allocations treated? A) Salary allocations take precedence over creditor payments. B) Salary allocations take precedence over amounts due to partners with respect to their capital interests, but not profits. C) Salary allocations take precedence over amounts due to partners with respect to their capital profits, but not capital interests. D) Salary allocations are disregarded.

Q: Gains and losses incurred at liquidation are distributed to the partners using the residual profit and loss sharing ratios because A) using ownership percentages would permit solvent partners to not share profits with insolvent partners. B) the residual profit and loss ratios represent the ownership percentages. C) these amounts represent profits and losses from prior periods that would have been shared using the residual profit and loss ratios. D) using the established profit and loss sharing ratios is not permitted.

Q: Which of the following procedures is acceptable when accounting for a deficit balance in a partner's capital account during partnership liquidation, if the partner with a negative capital balance is personally insolvent? A) The partner with a negative capital balance must contribute personal assets to the partnership that are sufficient to bring the capital account to zero. B) The negative capital balance may be absorbed by those partners having a positive capital balance according to the residual profit and loss sharing ratios that apply to all the partners. C) The negative capital balance may be absorbed by those partners having a positive capital balance according to the residual profit and loss sharing ratios that apply to those partners having positive balances. D) The partner with a negative capital balance must contribute personal assets to the partnership that are sufficient to bring the capital account to the same level of the other partners' capital accounts.

Q: Which statement is correct in describing the rank order of payments as specified by the Uniform Partnership Act? A) Payments to partners are ranked equally, regardless of underlying basis. B) Payment to partners with excess capital balances may be placed ahead of payments to creditors. C) Payments to creditors other than partners are ranked ahead of payments to partners. D) After payments are made to other creditors and partners with loans to the partnership, payment up to the same amount can be made to partners with capital interests.

Q: The partners of the Minion, Nocti and Overly partnership share profits and losses in the ratio of 6:3:1, respectively. The partners have decided to liquidate and terminate the partnership. Prior to liquidation, the partnership balance sheet was as follows: Cash $ 20,000 Liabilities $ 120,000 Inventory 100,000 Minion, capital 60,000 Fixed assets - net 160,000 Nocti, capital 80,000 Overly, capital 20,000 Total assets $ 280,000 Total equity $ 280,000 Required: Prepare a schedule of liquidation, given that the partnership sold the inventory for $40,000 and the fixed assets for $120,000.

Q: A cash distribution plan for the Jonah, Krispy, and Lemon partnership was as follows: Priority Creditors Jonah Krispy Lemon First $100,000 100% Next $180,000 44% 10% 46% Next $270,000 2/9 1/9 2/3 Remainder 11% 44% 45% Required: If $700,000 of cash was distributed by the partnership, how much was received respectively by the priority creditors, Jonah, Krispy, and Lemon?

Q: Eve, Fig, Gus, and Hal are partners who share profits and losses 50%, 25%, 15%, and 10%, respectively. The partnership will be liquidated gradually over several months beginning January 1, 2011. The partnership trial balance at December 31, 2010 is as follows: Debits Credits Cash $ 9,000 Accounts receivable 26,000 Inventory 78,000 Loan to Eve 16,000 Furniture 27,000 Equipment 59,000 Goodwill 10,000 Accounts payable $ 23,000 Note payable 70,000 Loan from Hal 7,000 Eve, capital (50%) 46,000 Fig, capital (25%) 38,000 Gus, capital (15%) 15,000 Hal, capital (10%) 26,000 Totals $ 225,000 $ 225,000 Required: Prepare a cash distribution plan for January 1, 2011, showing how cash installments will be distributed among the partners as it becomes available. Prepare vulnerability rankings for the partners and a schedule of assumed loss absorption.

Q: Alf, Bill, Cam, and Dot are partners who share profits and losses 30%, 20%, 35%, and 15%, respectively. The partnership will be liquidated gradually over several months beginning January 1, 2011. The partnership trial balance at December 31, 2010 is as follows: Debits Credits Cash $ 6,000 Accounts receivable 20,000 Inventory 50,000 Loan to Bill 8,000 Furniture 30,000 Equipment 36,000 Goodwill 20,000 Accounts payable $ 23,500 Note payable 60,000 Loan from Cam 12,400 Alf, capital (30%) 24,000 Bill, capital (20%) 18,000 Cam, capital (35%) 24,000 Dot, capital (15%) 8,100 Totals $ 170,000 $ 170,000 Required: Prepare a cash distribution plan for January 1, 2011, showing how cash installments will be distributed among the partners as it becomes available. Prepare vulnerability rankings for the partners and a schedule of assumed loss absorption.

Q: The partners of Nelatyna Manufacturing have decided to dissolve their partnership as of the end of 2010. The partnership is going to liquidate during the first several months of 2011. The four partners of Nell, Ann, Tyler and Nadine, share profits and losses 35%, 30%, 25%, and 10%, respectively. The partnership trial balance at December 31, 2010 is as follows: Debits Credits Cash $ 60,000 Accounts receivable 150,000 Inventory 115,000 Loan to Tyler 20,000 Furniture 86,000 Equipment 147,000 Goodwill 63,000 Accounts payable $ 140,000 Note payable 200,000 Loan from Nell 30,000 Nell, capital (35%) 110,000 Ann, capital (30%) 60,000 Tyler, capital (25%) 73,000 Nadine, capital (10%) 28,000 Totals $ 641,000 $ 641,000 Required: Prepare a cash distribution plan for January 1, 2011, showing how cash installments will be distributed among the partners as it becomes available. Prepare vulnerability rankings for the partners and a schedule of assumed loss absorption.

Q: Tye, Ula, Val, and Watt are partners who share profits and losses 40%, 30%, 20%, and 10%, respectively. The partnership will be liquidated gradually over several months beginning January 1, 2011. The partnership trial balance at December 31, 2010 is as follows: Debits Credits Cash $ 3,000 Accounts receivable 19,000 Inventory 25,000 Loan to Val 5,000 Furniture 15,000 Equipment 10,000 Goodwill 12,000 Accounts payable $ 13,600 Note payable 30,000 Loan from Tye 5,000 Tye, capital (40%) 15,000 Ula, capital (30%) 9,000 Val, capital (20%) 12,400 Watt, capital (10%) 4,000 Totals $ 89,000 $ 89,000 Required: Prepare a cash distribution plan for January 1, 2011, showing how cash installments will be distributed among the partners as it becomes available. Prepare vulnerability rankings for the partners and a schedule of assumed loss absorption.