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Flashcards in MISCA Deck (12):
1

Quinn is preparing personal statement of financial condition as of April 30, year I. Included in Quinn's assets are the following:

50% of the voting stock of Ink Corp. A stockholders' agreement restricts the sale of the stock and, under certain circumstances, requires Ink to repurchase the stock. Quinn's tax basis for the stock is $430,000, and at April 30, year I, the buyout value is $675,000.

Jewelry with a fair value aggregating $70,000 based on an independent appraisal on April 30, year I, for insurance purposes. This jewelry was acquired by purchase and gift over a 10-year period and has a total tax basis of $40,000.

What is the total amount at which the Ink stock and jewelry should be reported in Quinn's April 30, year I, personal statement of financial condition?

$745,000

2

Personal financial statements should include which of the following statements?

a. Changes in net worth and Cash flows

b. Financial conditions

c. Financial conditions and Changes in net worth

d. Financial conditions, Changes in net worth, and Cash flows

Financial conditions and Changes in net worth

3

John Smith owns 50% of the common stock of Sally Corp. Smith paid $30,000 for this stock in year I. At December 31, year 5, it was ascertained that Smith's stock ownership in Sally had a current value of $180,000. Sally's cumulative net income and cash dividends declared for the five years ended December 31, year 5, were $275,000 and $40,000 respectively. In Smith's personal statement of financial condition at December 31, year 5, what amount should be reported as his net investment in Sally? 

$180,000

4

Personal financial statements should present

 Assets at their estimated current values and liabilities at their estimated current amounts at the date of the financial statements.

5

The estimated current values of Lane's personal assets at December 31, year I, totaled $1,000,000, with tax bases aggregating $600,000. Included in these assets was a vested interest in a deferred profit-sharing plan with a current value of $80,000 and a tax basis of $70,000. The estimated current amounts of Lane's personal liabilities equaled their tax bases at December 31, year I. Lane's year I effective income tax rate was 30%. In Lane's personal statement of financial condition at December 31, year I, what amount should be provided for estimated income taxes relating to the excess of current values over tax bases? 

$120,000

6

In personal statement of financial condition, which of the following should be reported at quoted market prices? 

a. Neither

b. Marketable debt securities and Maketable equity securities

c. Marketable equity securities

d. Marketable debt securities

 Marketable debt securities and Maketable equity securities

7

Mrs. Taft owns a $150,000 insurance policy on her husband's life. The cash value of the policy is $125,000, and there is a $50,000 loan against the policy. In the Tarts' personal statement of financial condition at December 31, year I, what amount should be shown as an investment in life insurance? 

$75,000

8

Mr. & Mrs. Carson are applying for a bank loan and the bank has requested a personal statement of financial condition as of December 31, year 3. Included in their assets at this date are the following:

1,000 shares of Alden Corporation common stock purchased in year 3 at cost of $50,000. The quoted market value of the stock was $75 per share on December 31, year 3.

A residence purchased in year I at a cost of $120,000. Improvements costing $15,000 were made in year 9. Unimproved similar homes in the area are currently selling at approximately the same price levels as in year I.

In the Carsons' December 31, year 3 personal statement of financial condition, the above assets should be reported at total amount of

$210,000

9

Ron Alda owns 100% of Hako Corp.'s outstanding capital stock. Alda paid $60,000 for this stock in year I. At December 31, year 4, the book value of Hako's net assets amounted to $300,000. It has been ascertained that Alda's 100% stock ownership in Hako had a current value of $500,000 at December 31, year 4. Alda has an employment contract with Hako under Which Alda is to receive a salary' of $100,000 annually for a Ill-year period beginning in January year 4. In Alda's personal statement of financial condition at December 31, year 4, what amount should be shown as his net investment in Hako? 

$500,000

10

Smith, a calendar-year taxpayer, is preparing a personal statement of financial condition as of April 30, year 2. Smith's year I income tax liability was paid in full on April 15, year 2. Smith's tax on income earned between January and April year 2 is estimated at $20,000. In addition, $30,000 is estimated for income tax on the differences between the estimated current values and current amounts of Smith's assets and liabilities and their tax bases at April 30, year 2. No withholdings or payments have been made towards the year 2 income tax liability. In Smith's April 30, year 2 statement of financial condition, What amount should be reported, between liabilities and net worth, as estimated income taxes?

$30,000

11

A business interest that constitutes large part of an individual's total assets should be presented in personal statement of financial condition as 

A single amount equal to the estimated current value of the business interest.

12

In personal financial statements, how should estimated income taxes on the excess of the estimated current values of assets over their tax bases be reported in the statement of financial condition? 

Between liabilities and net worth.