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2019 Annual Regional Convention Junior Accounting Masters (Finals Round)

THEORY 1. Which is incorrect concerning financial statements? a. The objective of general purpose financial statements is to provide information about the financial position, performance and cash flows of an enterprise that is useful to a wide range of users in making economic decisions. b. Financial statements also show the results of management’s stewardship of the resources entrusted to it. c. The management of an enterprise has the primary responsibility for the preparation and presentation of financial statements. d. Financial statements are prepared and presented at least annually and are directed toward the specific needs of a wide range of users. Answer: D 2. These users are interested in the allocation of resources and activities of enterprises, and therefore require information to regulate the activities of enterprises, determine taxation policies and as a basis for national income and similar statistics. a. Suppliers and trade creditors c. Public b. Customers d. Governments and their agencies Answer: D 3. Qualitative characteristics a. Are the attributes that make the information provided in the financial statement useful to users b. Are generally accepted accounting principles c. Are the basic notions and fundamental premises on which the accounting process is based d. Refer to the definition, recognition and measurement of the elements from which financial statements are constructed. Answer: A 4. Accounting is I. A service activity and its function is to provide quantitative information primarily financial in nature, about economic entities, that is intended to be useful in making economic decision. II. The art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are in part at least of a financial character and interpreting the result thereof. III. The process of identifying, measuring and communicating economic information to permit informed judgement and decision by users of the information. a. I, II, and III b. I only c. II only d. III only Answer: A 5. A partner assigned his partnership interest to a third party. Which statement best describes the legal ramifications to the assignee? a. The assignment of the partnership interest does not entitle the assignee to partnership assets upon a liquidation. b. The assignment dissolves the partnership.

2019 Annual Regional Convention Junior Accounting Masters (Finals Round)

c. The assignee has the right to share in the management of the partnership. d. The assignee does not become a partner but has the right to share in future partnership profits and to receive the proper share of partnership assets upon liquidation. Answer: D

6. A partnership formed for the exercise of a profession which is duly registered is an example of: a. Universal partnership of profits b. Universal partnership of all present property c. Particular partnership d. Partnership by estoppel Answer: C 7. One of the following is not a requisite of a contract of partnership. Which is it? a. There must be a valid contract. b. There must be a mutual contribution of money, property, or industry to a common fund. c. It is established for the common benefit of the partners which is to obtain profits and divide the same among themselves. d. The articles are kept secret among members, Answer: 8. It is a possible asset that arises from past event and whose existence will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the enterprise. a. Contingent Asset c. Goodwill b. Intangible Asset d. Other asset Answer: A 9. The elements directly related to the measurement of financial position are: a. Assets, liabilities, equity, revenue and expenses b. Assets, liabilities, equity and revenue c. Assets, liabilities and equity d. Revenue and expenses Answer: C 10. One of the following is not a characteristic of contract of partnership. a. Real, in that the partner must deliver their contributions in order for the partnership contract to be perfected. b. Principal, because it can stand by itself. c. Preparatory, because it is a means by which other contracts will be entered into. d. Onerous, because the parties contribute money, property or industry to the common fund. Answer: A 11. A limited liability company (LLC): I. Is governed by the laws of the states in which it is formed II. Provides liability protection to its investors

2019 Annual Regional Convention Junior Accounting Masters (Finals Round)

III. Does not offer pass through taxation benefits of partnership. a. Both I and III c. Both I and II b. III only d. I,II, and III

Answer: 12. It is the process of incorporating in the balance sheet or income statement an item that meets the definition of an element of financial statements. a. Recognition b. Allocation c. Realization d. Summarization Answer: A 13. Which of the following statements concerning discount on note payable is false? a. Discount on note payable may be debited when a company discounts its own note with the bank b. The discount on note payable is a contra liability account which is shown as a deduction from note payable. c. The discount on note payable represents interest charges applicable to future periods. d. Amortizing the discount causes the carrying value of the liability to gradually decrease over the life of the note. Answer: D 14. Financial statements portray the financial effects of transactions and other events by grouping them into broad classes according to their economic characteristics. These broad classes are termed as the: a. Elements of financial statements c. Accounting constraints b. Features of Accounting d. Concepts of capital maintenance Answer: A 15. The legal characteristic of a partnership whereby each partner is an agent of the partnership and is able to bind the partnership to contracts within the normal scope of the partnership business is known as: Answer: Mutual Agency

2019 Annual Regional Convention Junior Accounting Masters (Finals Round)

PROBLEM

1. Roberts and Smith drafted a partnership agreement that lists the following the partnership’s formation: Contributed By: Roberts Cash 20,000 Inventory Building Furniture & Equipment 15,000

assets contributed at

Smith 30,000 15,000 40,000

The building is subject to a mortgage of P10,000, which the partnership has assumed. The partnership agreement also specifies that profits and losses are to be distributed evenly. What total amount should be recorded as capital for Roberts and Smith at the formation? 2. RD formed a partnership on February 10, 2019. R contributed cash of 150,000, while D contributed inventory with a fair value of 120,000. Due to R’s expertise in selling, D agreed that R should have 60% of the total capital of the partnership. R and D agreed to recognize goodwill. What is the total capital of the RD partnership after the goodwill is recognized? 3. On July 1, 2019, a partnership was formed by James and Short. James contributed cash worth 100,000. Short, previously a sole proprietor, contributed property other than cash, including realty subject to a mortgage, which was assumed by the partnership. Short’s previous total assets were worth 500,000. The mortgage of the realty was 30,000. No other liability was left. Short’s capital account at July 1, 2019 should be recorded at__?

2019 Annual Regional Convention Junior Accounting Masters (Finals Round)

2019 Annual Regional Convention Junior Accounting Masters (Finals Round)