A client of the CPA firm of Harston and Mendez is a medical practice of seven local doctors. One doctor has been sued for several million dollars as the result of a recent operation. Because of what appears to be this doctor’s very poor judgment, a patient died. Although that doctor was solely involved with the patient in question, the lawsuit names the entire practice as a defendant. Originally, four of these doctorsformed this business as a general partnership. However, five years ago, the partners converted the businessto a limited liability partnership based on the laws of the state in which they operate. Read the following articles as well as any other published information that is available on partnerand partnership liability: “Partners Forever? Within Andersen, Personal Liability May Bring Ruin,” The Wall Street Journal,April 2, 2002, p. C1. “Collapse: Speed of Andersen’s Demise Amazing,” Milwaukee Journal Sentinel, June 16, 2002, p.D1. Required Based on the facts presented in this case, answer the following question: What factors will be important in determining the exact liability (if any) of these six doctors?
> In each of the following transactions ( a ) through ( c ) for Romney’s Marketing Company, use the threestep process illustrated in the chapter to record the adjusting entry at year-end December 31, 2012. The process includes (1) determining if revenue wa
> For each of the transactions in M4-4, indicate the amounts and direction of effects of the adjusting entry on the elements of the balance sheet and income statement. Using the following format, indicate + for increase, − for decrease, a
> In each of the following transactions ( a ) through ( c ) for Romney’s Marketing Company, use the threestep process illustrated in the chapter to record the adjusting entry at year-end December 31, 2012. The process includes (1) determining if revenue wa
> Match each definition with its related term by entering the appropriate letter in the space provided. Delinition Term (1) A revenue not yet earned; collected in advance. (2) Rent not yet collected; already earned. (3) Property taxes incurred; not ye
> Hagadorn Company has the following adjusted accounts and balances at year-end (June 30, 2011): Prepare an adjusted trial balance in good form for the Hagadorn Company at June 30, 2011. Accounts Payable $ 250 Interest Expense $ 70 Accounts Receivabl
> Refer to the adjusted trial balance in M4-8. Prepare the closing entry on December 31, 2012. Romney’s Marketing Company has the following adjusted trial balance at December 31, 2012. No dividends were declared. However, 500 shares issu
> Starwood Hotels & Resorts Worldwide, Inc., is one of the world’s largest hotel and leisure companies. It conducts business both directly and through its subsidiaries, including the following hotel brands: Sheraton, Four Points, W, Aloft, The Luxury Colle
> Match each definition with its related term by entering the appropriate letter in the space provided. Delinition Term (1) At year-end, service revenue of S1,000 was collected in cash but was not yet earned. A. Accrued expense B. Deferred expense C.
> Massa Company, which has been operating for three years, provides marketing consulting services worldwide for dot-com companies. You are a financial analyst assigned to report on the Massa management team’s effectiveness at managing its
> According to a recent Form 10-K report of Mattel, Inc., the company “designs, manufactures, and markets a broad variety of toy products worldwide.” Mattel’s brands include Barbie, Hot Wheels, FisherPr
> You are considering lending a car to a friend so she can drive to Aspen. What costswould you ask her to reimburse? How would your answer change, if at all, if youdecided to go along? Identify the possible options and explain your choices.
> A manager once asked, “How would you calculate the cost of a checking account?” What will be your first question to the manager?
> Does the passage of Sarbanes-Oxley mean that codes of ethics are no longer necessary?
> Identify three key financial managers in an organization and their major responsibilities.
> How can cost accounting information together with a classification of activities intothose that are value-added and those that are nonvalue-added help managers improvean organization’s performance?
> The following story is true except that all names have been changed and the time period has been compressed: Charles Austin graduated from a prestigious business school and took a job in a public accounting firm in Atlanta. A client hired him after five
> Before Miller Cereals can introduce the new cereal, the board of directors has to give their approval. The marketing manager really wants to introduce the new product and believes (honestly) that it will be profitable and an important next step in the fi
> Miller Cereals is a small milling company that makes a single brand of cereal. Recently, a business school intern recommended that the company introduce a second cereal in order to “diversify the product portfolio.” Cu
> The managers of Quince Products (Problem 1-39) decide they will hire a management accountant to help them analyze the decision to expand their product line. They solicit bids from various accountants in the city and receive three proposals. In describing
> Who are the customers of cost accounting?
> Quince Products is a small company in southern California that makes jams and preserves. Recently, a sales rep from one of the company’s suppliers suggested that Quince could increase its profitability by 50 percent if it introduced a s
> Refer to Exhibit 1.5, which shows budgeted versus actual costs. Assume that Carmen’s Cookies is preparing a budget for the month ending November 30. Management prepares the budget for the month ending November 30 by starting with the ac
> Refer to Exhibit 1.5. Assume that Carmen’s Cookies is preparing a budget for the month ending September 30. Management prepares the budget by starting with the actual results for April that appear in Exhibit 1.5. Then, management consid
> Tom’s Tax Services is a small accounting firm that offers tax services to small businesses and individuals. A local store owner has approached Tom about doing his taxes but is concerned about the fees Tom normally charges. The costs and
> KC Services provides landscaping services in Edison. Kate Chen, the owner, is concerned about the recent losses the company has incurred and is considering dropping its lawn services, which she feels are marginal to the company’s busine
> Dewi Hartono is an assistant controller at Giant Engineering, which contracts with the Defense Department to build and maintain roads on military bases. Dewi recently determined that the company was including the direct costs of work for private clients
> Distinguish between the value chain, the supply chain, and the distribution chain.
> Refer to the information in Exercise 1-24. Jon Blake, the cost analyst working in the CFO’s office at the Business School, learns that the building to be rented for the evening program is owned by a company in which the dean is a principal investor. Afte
> Continental Condiments is a large food products firm in Pennsylvania. Its sales staff has a strong incentive plan tied to meeting quarterly budgets. On June 25, Maria Tuzzi, a divisional controller, learns that some of the sales staff asked customers to
> The chapter identified five financial management titles with responsibilities. Required Match the financial management title in the first column with the major responsibility in the second column of the following table: Title ___ CFO ___ Treasurer ___ C
> For each cost accounting development listed below, identify one value chain component where it might be used and described how it could be used in that component. a. Activity-based costing b. Benchmarking c. Cost of quality d. Customer relationship manag
> Refer to Exhibit 1.5, which shows budgeted versus actual costs. Assume that Carmen’s Cookies is preparing a budget for the month ending June 30. Management prepares the budget by starting with the actual results for April 30 that appear
> Refer to the information in Exercise 1-23. The dean of the Business School is considering expanding the BBA program by offering an evening program in a nearby city. The program would be the same size (in terms of students). The school’s CFO estimates tha
> State University Business School (SUBS) offers several degrees, including Bachelor of BusinessAdministration (BBA). The new dean believes in using cost accounting information tomake decisions and is reviewing a staff-developed income statement broken dow
> Betty’s Fashions operates retail stores in both downtown and suburban locations. The companyhas two responsibility centers: the City Division, which contains stores in downtown locations, and the Mall Division, which contains stores in suburban locations
> As an analyst at Delta Airlines, you are asked to help the operations staff. Operations has identified a new method of loading baggage that is expected to result in a 30 percent reductionin labor time but no changes in any other costs. The current labor
> Coastal Cabinets produces cabinets for new home builders. You have been called in to settle adispute between Coastal Cabinets and Executive Homes, a builder of custom homes. Executive Homes buys 20,000 units of a particular cabinet from Coastal Cabinets
> Place the letter of the appropriate accounting cost in Column 2 in the blank next toeach decision category in Column 1. Column 1 ___ Providingcost information for financial reporting ___ Identifying the best store in a chain ___ Determining which plant t
> Apple, Inc. incurs many types of costs in its operations. Required For each cost in the following table, identify the stage in the value chain where this cost is incurred: Cost ___ Programmer costs for a new operating system ___ Costs to ship computers
> Will studying cost accounting increase the chances that Carmen’s Cookies will succeed? How? Will it guarantee success? Explain.
> Why does a cost accountant need to be familiar with new developments in informationtechnology?
> Refer to the Business Application discussion of options backdating. If stock optionsand other forms of performance-based compensation result in some managers engagingin unethical or illegal behavior, why do firms still use them?
> Refer to the Business Application discussion of supply chain costs. A colleague says, “We don’t have to worry about other firms in the supply chain. If every firm in the chain minimizes its own cost, we can minimize the total cost and give the customer t
> What potential conflicts might arise between marketing managers and the controller’sstaff? How might these potential conflicts be resolved with a minimum of interference from the chief executive officer?
> Nabisco (a unit of Kraft Foods) makes a variety of cookies (OreosTM, for example)just like Carmen’s Cookies. In what ways are the cost accounting issues the same? Inwhat ways are they different?
> Airlines are well known for using complex pricing structures. For example, it is often (butnot always) less expensive to buy a ticket in advance than it is on the day of the flight.However, if the airline offered this lower (“discount”) fare for all seat
> Would you support a proposal to develop a set of “generally accepted” accountingstandards for measuring executive performance that would be used to determine compensation?Why or why not?
> “It’s not the job of accounting to determine strategy. It is only used to measure results.”Discuss.
> Explain the differences between financial accounting and cost accounting. Why arethese differences important?
> The partnership of Wilson, Cho, and Arrington has the following account information: This partnership will be liquidated, and the partners are scheduled to receive cash equal to any endingpositive capital balance. If a negative capital balance results,
> Read the following as well as any other published articles on the bankruptcy of the partnership of Laventhol&Horwath: “Laventhol Says It Plans to File for Chapter 11,” The Wall Street Journal, November 20, 1990, p. A3. “Laventhol Partners Face Long Proce
> If a partnership is liquidated, how is the final allocation of business assets made to the partners? a. Equally. b. According to the profit and loss ratio. c. According to the final capital account balances. d. According to the initial investment made by
> What is a predistribution plan? a. A list of the procedures to be performed during a liquidation. b. A guide for the cash distributions to partners during a liquidation. c. A determination of the final cash distribution to the partners on the settlement
> During a liquidation, if a partner’s capital account balance drops below zero, what should happen? a. The other partners file a legal suit against the partner with the deficit balance. b. The partner with the highest capital balance contributes sufficien
> Which of the following statements is true concerning the accounting for a partnership going throughliquidation? a. Gains and losses are reported directly as increases and decreases in the appropriate capitalaccount. b. A separate income statement is crea
> The balance sheet for the Delphine, Xavier, and Olivier partnership follows: Delphine, Xavier, and Olivier share profits and losses in the ratio of 4:4:2, respectively. The partnershave agreed to terminate the business and estimate that $12,000 in liqu
> The following condensed balance sheet is for the partnership of Miller, Tyson, and Watson, whoshare profits and losses in the ratio of 6:2:2, respectively: For how much money must the other assets be sold so that each partner receives some amount ofcas
> The following condensed balance sheet is for the partnership of Hardwick, Saunders, and Ferris,who share profits and losses in the ratio of 4:3:3, respectively: The partners decide to liquidate the partnership. Forty percent of the other assets are sol
> What is the purpose of a drawing account in a partnership’s financial records?
> A partnership currently holds three assets: cash, $10,000; land, $35,000; and a building, $50,000.The partnership has no liabilities. The partners anticipate that expenses required to liquidate theirpartnership will amount to $5,000. Capital balances are
> A local dental partnership has been liquidated and the final capital balances are Atkinson, capital (40% of all profits and losses) . . . . . . . . . $ 70,000 Kaporale, capital (30%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 De
> A local partnership is liquidating and has only two assets (cash of $10,000 and land with a cost of$35,000). All partnership liabilities have been paid. All partners are personally insolvent. The partnershave capital balances and share profits and losses
> A partnership has the following account balances: Cash, $70,000; Other Assets, $540,000; Liabilities,$260,000; Nixon (50 percent of profits and losses), $170,000; Cleveland (30 percent),$110,000; Pierce (20 percent), $70,000. The company liquidates, and
> A partnership has gone through liquidation and now reports the following account balances: Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,000 Loan from Jones . . . . . . . . . . . . . . . . . . . . . . . . 3,000 Wayman, capital
> Carney, Pierce, Menton, and Hoehn are partners who share profits and losses on a 4:3:2:1 basis, respectively.They are beginning to liquidate the business. At the start of this process, capital balances are Carney, capital. . . . . . . . . . . . . . . . .
> A partnership is currently holding $400,000 in assets and $234,000 in liabilities. The partnershipis to be liquidated, and $20,000 is the best estimation of the expenses that will be incurred duringthis process. The four partners share profits and losses
> A partnership has the following capital balances: X (50 percent of profits and losses) = $150,000; Y(30 percent of profits and losses) = $120,000; Z (20 percent of profits and losses) = $80,000. If thepartnership is to be liquidated and $30,000 becomes i
> A partnership has the following balance sheet prior to liquidation (partners’ profit and loss ratiosare in parentheses): During liquidation, other assets are sold for $80,000, liabilities are paid in full, and $15,000 inliquidation ex
> A partnership is considering possible liquidation because one of the partners (Bell) is personallyinsolvent. Profits and losses are divided on a 4:3:2:1 basis, respectively. Capital balances at the currenttime are Bell, capital . . . . . . . . . . . . .
> If a partner is contributing attributes to a partnership such as an established clientele or a particularexpertise, what two methods can be used to record the contribution? Describe each method.
> A local partnership is liquidating and is currently reporting the following capital balances: Barley, capital (50% share of all profits and losses) . . . . . $ 44,000 Carter, capital (30%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
> Part A The partnership of Butler, Osman, and Ward was formed several years as a local tax preparationfirm. Two partners have reached retirement age and the partners have decided to terminate operationsand liquidate the business. Liquidation expenses of $
> Part A The partnership of Wingler, Norris, Rodgers, and Guthrie was formed several years ago as a localarchitectural firm. Several partners have recently undergone personal financial problems and havedecided to terminate operations and liquidate the busi
> The partnership of Frick, Wilson, and Clarke has elected to cease all operations and liquidate itsbusiness property. A balance sheet drawn up at this time shows the following account balances: Part A Prepare a predistribution plan for this partnership
> Following is a series of independent cases. In each situation, indicate the cash distribution to bemade to partners at the end of the liquidation process. Unless otherwise stated, assume that all solventpartners will reimburse the partnership for their d
> On January 1, the partners of Van, Bakel, and Cox (who share profits and losses in the ratio of5:3:2, respectively) decide to liquidate their partnership. The trial balance at this date follows: The partners plan a program of piecemeal conversion of th
> The partnership of Winn, Xie, Yang, and Zed has the following balance sheet: Zed is personally insolvent, and one of his creditors is considering suing the partnership for the$10,000 that is currently owed. The creditor realizes that this litigation co
> March, April, and May have been in partnership for a number of years. The partners allocate allprofits and losses on a 2:3:1 basis, respectively. Recently, each partner has become personallyinsolvent and, thus, the partners have decided to liquidate the
> The partnership of Anderson, Berry, Hammond, and Winwood is being liquidated. It currentlyholds cash of $20,000 but no other assets. Liabilities amount to $30,000. The capital balances are Anderson (40% of profits and losses) . . . . . . . . . . . . . .
> The partnership of Hendrick, Mitchum, and Redding has the following account balances: This partnership is being liquidated. Hendrick and Mitchum are each entitled to 40 percent of allprofits and losses with the remaining 20 percent going to Redding. a.
> What valuation should be recorded for noncash assets transferred to a partnership by one of thepartners?
> A local partnership is to be liquidated. Commissions and other liquidation expenses are expected tototal $19,000. The business’s balance sheet prior to the commencement of liquidation is as follows: Prepare a predistribution plan for
> The Drysdale, Koufax, and Marichal partnership has the following balance sheet immediately priorto liquidation: a. Liquidation expenses are estimated to be $15,000. Prepare a predistribution schedule to guidethe distribution of cash. b. Assume that ass
> The partnership of Larson, Norris, Spencer, and Harrison has decided to terminate operations andliquidate all business property. During this process, the partners expect to incur $8,000 in liquidationexpenses. All partners are currently solvent. The bala
> Alex and Bess have been in partnership for many years. The partners, who share profits and losses on a60:40 basis, respectively, wish to retire and have agreed to liquidate the business. Liquidation expensesare estimated to be $5,000. At the date the par
> The following balance sheet is for a local partnership in which the partners have become veryunhappy with each other. To avoid more conflict, the partners have decided to cease operations and sell all assets. Using thisinformation, answer the following
> A partnership has liquidated all assets but still reports the following account balances: The partners split profits and losses as follows: Cisneros, 40 percent; Beck, 20 percent; Sadak,10 percent; Emerson, 20 percent; and Page 10 percent Beck, loan . .
> According to the Uniform Partnership Act, what events should occur if a partner incurs a negativecapital balance during the liquidation process?
> Why would the members of a partnership elect to terminate business operations and liquidate allnoncash assets?
> What is the difference between the dissolution of a partnership and the liquidation of partnershipproperty?
> How is a predistribution plan created for a partnership liquidation?
> What is an articles of partnership agreement, and what information should this document contain?
> What is the purpose of a proposed schedule of liquidation, and how is it developed?
> How do loans from partners affect the distribution of assets in a partnership liquidation?
> How are safe capital balances computed when preliminary distributions of cash are to be made in apartnership liquidation?
> What is the purpose of a statement of liquidation? What information does it convey to its readers?
> After liquidating all property and paying partnership obligations, what is the basis for allocatingremaining cash among the partners?
> Why are liquidation gains and losses usually recorded as direct adjustments to the partners’ capitalaccounts?
> Erin Carson, Megyn Delaney, and Caitlin Erikson form a partnership as a first step in creating a business.Carson invests most of the capital but does not plan to be actively involved in the day-to-dayoperations. Delaney has had some experience and is exp
> Go to the Buckeye Partners, L.P. website where forms filed with the SEC are available through the InvestorCenter. Find Buckeye’s recent annual financial statements in their 10–K report for the partnership. Required Review Buckeye’s financial statements
