Ch 12 - Partnerships
True/False: A partnership is a good choice to protect investors against personal liability risk
What is false? (Partnerships have unlimited liability)
The cumulative net income (and loss) of a corporation not distributed as dividends to its shareholders
What is retained earnings?
One advantage and one disadvantage of a bond
What is any of these advantages:
1. Bonds do not affect owner control
2. Interest on bonds is tax deductible
3. Bonds can increase return on equity
What is any of these disadvantages:
1. Bonds pay periodic interest
2. Bonds require repayment of par value at maturity
3. Bonds can decrease return on equity
The labeling acronym for fair value adjustment
What is IS IT EA?
Income - Stock
Income - Trading
Equity - AFS
What is a limited liability partnership?
Two rights guaranteed to stockholders of a corporation
What is any two of the following:
1. Voting rights/electing board of directors
2. Dividend payments when declared
3. Sell or dispose of stock
4. Share in assets if liquidated
5. Preemptive rights
True/False: The stated interest rate on bonds is almost always presented annually
What is true?
The name for a company that has a controlling influence (ownership) over another, and the name of an investee company that is owned by another.
What is parent and subsidiary?
The first step that must legally be taken when liquidating a partnership
What is paying off/settling liabilities and debts?
The account type of treasury stock
What is contra-equity?
The account type of Discount on Bonds Payable
What is a contra-liability?
Multiple Choice:
Financial statements that show the financial statements of all entities under the parent's control, including all subsidiaries are called:
a. Comprehensive financial statements
b. Consolidated financial statements
c. Equity financial statements
d. Investor financial statements
What is b, consolidated financial statements?
The concept that states each partner is allowed to bind the partnership to contracts
What is mutual agency?
The type of preferred stock that gives its owners the right to be paid both the current and all prior period's unpaid dividends before any dividend is paid to common stockholders
What is cumulative preferred stock?
The account type of Premium on Bonds Payable
What is an adjunct-liability?
The account type of equity method investments
What is an asset?
Multiple Choice: Which of the following business types has the advantage of limited liability and no additional business income tax?
a. C Corporation
b. General Partnership
c. Limited Liability Company (LLC)
d. Sole Proprietorship
What is c, limited liability company (LLC)?
Multiple Choice: A company made a material error in calculating & reporting amortization expense in Year 1, which was discovered in Year 2. This item should be reported as a prior period adjustment:
a. on Year 1 statement of retained earnings
b. on Year 1 income statement
c. on Year 2 statement of retained earnings
d. on Year 2 income statement
What is c, on Year 2 statement of retained earnings?
The net amount at which bonds are reported on the balance sheet; the par value of bonds less any unamortized discount or plus any unamortized premium
What is the carrying (book) value of bonds?
Fill in the blank for equity investments:
Less than 20% ownership = ___ method (insignificant influence)
20% - 50% ownership = ___ method (significant influence)
Over 50% ownership = ___ method (controlling influence)
What is fair value, equity, and consolidation?