Correct Answer: A

Explanation: Choice "a" is correct. In testing long-term investments, an auditor ordinarily would use analytical procedures to ascertain the reasonableness of the completeness of recorded investment income. These procedures would probably include a comparison of the recorded investment income with the expected amount (based upon the related interest rate, dividends declared, etc.) and the income balance audited in the prior year. Choice "b" is incorrect. Classification between balance sheet portfolios would most likely be tested by confirming the terms of the investment and making inquiries of management regarding how long they intend to hold the securities. Choice "c" is incorrect. To test the valuation of marketable equity securities an auditor would most likely compare to market quotations (cost method) or examine the audited financial statements of the investee company (equity method). Choice "d" is incorrect. To identify and quantify the existence of unrealized gains and losses in the portfolio, an auditor would examine the trading prices in the Wall Street Journal (or other source) for those long-term investments carried under the cost method. For those carried under the equity method, an auditor would review the audited financial statements of the investee company.

Correct Answer: B

Explanation:

Choice "b" is correct. A partnership is an organization of two or more persons who carry on a business for

a profit.

Choice "a" is incorrect. Partnerships do not pay federal income taxes; the partners report their shares of

the partnership's income on their individual returns.

Choice "c" is incorrect. A partnership agreement need not be in writing.

Choice "d" is incorrect. If the partnership agreement is silent on the apportionment of liability for

partnership debts, state law or the Uniform Partnership Act will cover the omission.

Correct Answer: A

Explanation: Choice "a" is correct. $18,800 net present value. The net present value of an investment is calculated as the present value of the cash inflows minus the present value of the cash outflows. In this case, there is only one cash outflow (at the purchase date), and that amount ($200,000) is already at present value (or, is multiplied by a present value factor of 1.0).

Correct Answer: A

Explanation:

Choice "a" is correct. First, determine the amount and timing of cash needs:

Comments 1 Given 2 Computed balance, positive cash flows 3 Computed balance, negative cash flows 4 Borrow from LOC 5 Computed balance, negative cash flows + interest 6 Cumulative LOC Balance 7 Computed positive cash flows 8 Computed balance, positive cash flows - interest 9 Immediate pay down of LOC Choices "b", "c", and "d" are incorrect, per the above calculation.

Correct Answer: B

Explanation:

Choice "b" is correct. Comprehensive income is the change in equity of a business during a period from

transactions and other events and circumstances from non-owner sources. It includes all changes in equity

except those resulting from investments by owners and distributions to owners. SFAC 6 para 70.