Question

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

1. 
   

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 partner’s original interest in the partnership
		this will cause all assets to be written down to offset the acquisition cost of the withdrawing partner’s interest at the time of the withdraw

5 points   

QUESTION 17

1. 
   

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

1. 
   

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

Answer 1

Q14. partnership liabilities, partnership loans, partnership capital balances

Q15. All assets must be realized before any distribution can be made

Q16.​ this will cause all assets to be written down to offset the acquisition cost of the withdrawing partner’s interest at the time of the withdraw

Q17.requires all assets to be recorded at historical cost

Q18. the intercompany debt would be eliminated when consolidated statements are prepared so this would be a good idea