Mike Reed, a partner in Post Co., received the following distribution from Post
Type of asset / Post's basis / Fair market value
Cash / $11,000 / $11,000
Inventory / $5,000 / $12,500
Before this distribution, Reed's basis in post was $25,000
If this distribution were in complete liquidation of Reed's interest in Post, Reed's recognized gain or loss resulting from the distribution would be
a. $75,000 gain
b. $9,000 loss
c. $1,500 loss.
d. $0
Answer: B
CPA Exam
- Under which of the following circumstances would an auditor be most likely to intensify an examination of a $500 imprest petty cash fund?
- A typical objective of an operational audit is for the auditor to
- Jones, CPA, examined the 20X5 financial statements of Ray Corp. and issued an unmodified opinion on March 10, 20X6. On April 2, 20X6, Jones became aware of a 20X5 transaction that may materially affect the 20X5 financial statements. This transaction would have been investigated had it come to Jones' attention during the course of the examination. Jones should
- Which of the following would detect an understatement of a purchase discount?
- Which of the following statements extracted from a client's lawyer's letter concerning litigation, claims, and assessments most likely would cause the auditor to request clarification?
- Which of the following procedures most likely could assist an auditor in identifying related-party transactions?
- Which of the following steps should an auditor perform first to determine the existence of related parties?
- Which of the following ratios would an engagement partner most likely consider in the overall review stage of an audit?
- Treetop Corporation acquired a building and arranged mortgage financing during the year. Verification of the related mortgage acquisition costs would be least likely to include an examination of the related
- Which of the following statements is correct regarding the predictability of analytical procedures in a financial statement audit?
- Which of the audit procedures listed below would be least likely to disclose the existence of related-party transactions of a client during the period under audit?
- Which of the following is generally included or shown in the auditor's working papers for the audit of a nonpublic company?
- During the first part of the current fiscal year, the client company began dealing with certain customers on a consignment basis. Which of the following audit procedures is least likely to bring this new fact to the auditor's attention?
- An auditor who is engaged to examine the financial statements of a business enterprise will request a cutoff bank statement primarily in order to
- An example of a transaction which may be indicative of the existence of related parties is
- Which of the following items would most likely require an adjustment to the financial statements for the year ended December 31, year 1?
- When an auditor decides to confirm accounts receivable balances rather than individual invoices, it most likely would be beneficial to include with the confirmations
- The audit working papers often include a client-prepared, aged trial balance of accounts receivable as of the balance sheet date. This aging is best used by the auditor to
- Auditors should request that an audit client send a letter of inquiry to those attorneys who have been consulted concerning litigation, claims, or assessments. The primary reason for this request is to provide
- Which of the following management assertions is an auditor most likely testing if the audit objective states that all inventory on hand is reflected in the ending inventory balance?
- "In connection with an audit of our financial statements, management has prepared, and furnished to our auditors a description and evaluation of certain contingencies." The forgoing passage most likely is from a(n)
- Which of the following analyses appearing in a predecessor's working papers is the successor auditor least likely to be interested in reviewing?
- Which of the following procedures would an auditor most likely perform prior to the balance sheet date?
- A client's procurement system ends with the assumption of a liability and the eventual payment of the liability. Which of the following best describes the auditor's primary concern with respect to liabilities resulting from the procurement system?
- When title to merchandise in transit has passed to the audit client, the auditor examining a vendor's invoices as a purchase cutoff on December 31, the last day of the client's year, will encounter the greatest difficulty in gaining assurance with respect to the