Today's question: REG
Attachment and perfection will occur simultaneously when _________________

A) the security agreement so provides.

B) there is a purchase money security interest taken in inventory.

C) attachment is by possession.

D) the goods are sold on consignment.

Correct answer: C

Explanation:There are only three different ways to perfect: by possession, by filing and perfection by attachment. Possession will not only create the security agreement required for attachment, but will also result in perfection. Thus when attachment is by possession, attachment and possession occur simultaneously. Note that they would also occur simultaneously when perfection by attachment occurs.

The remaining answer choices are incorrect for the following reasons:

• Perfection will not occur merely because the security agreement so provides. You must perfect by one of the three methods.
• No possession or filing occurred and perfection by attachment requires a PMSI creditor in consumer goods, not a PMSI creditor in inventory. Thus, no perfection occurred.
• No possession, filing or perfection by attachment occurred and therefore there is no perfection.

Today's question: FAR

A 70%-owned subsidiary company declares and pays a cash dividend. What effect does the dividend have on the retained earnings and minority interest balances in the parent company's consolidated balance sheet?

A) No effect on either retained earnings or minority interest
B) No effect on retained earnings and a decrease in minority interest
C) Decreases in both retained earnings and minority interest
D) A decrease in retained earnings and no effect on minority interest

Correct Answer: B

Explanation: The parent's investment in subsidiary account and its proportionate share of the subsidiary's equity accounts, which include retained earnings, are eliminated in a consolidation. The remainder of the subsidiary's equity is reported separately as the minority interest. Thus, consolidated retained earnings is essentially the parent's retained earnings at year-end. The subsidiary's cash dividend reduces its retained earnings balance and therefore the minority interest but not the parent's retained earnings.

Today's question: AUD

Upon receipt of customers' checks in the mailroom, a responsible employee should prepare a remittance listing that is forwarded to the cashier. A copy of the listing should be sent to the:

A) Internal auditor to investigate the listing for unusual transactions

B) Treasurer to compare the listing with the monthly bank statement

C) Accounts receivable bookkeeper to update the subsidiary accounts receivable records

D) Entity's bank to compare the listing with the cashier's deposit slip

Correct answer: C

Explanation: A copy of the remittance listing is sent to the accounts receivable clerk and posted to the subsidiary records. Accounting for assets is a function that should be separated from the custody of those assets. The accounts receivable bookkeeper maintains records of the balance owed by each customer, while the cashier has custody of the cash. The cashier does not have an opportunity to cover a shortage of cash by using checks received on account because the AR ledger would indicate a different balance than that owed. There is no need to send copies to the internal auditor, the treasurer, or the bank, because the goal is to establish accountability for the asset.

Today's question: BEC

If a group of consumers decide to boycott a particular product, the expected result would be

A) An increase in the product price to make up lost revenue.

B) A decrease in the demand for the product.

C) An increase in product supply because of increased availability.

D) That companies in the industry would experience higher economic profits.

This one was a gimme!!!

Correct answer: B

Explanation: A boycott would decrease the demand at all price levels and result in a shift in the demand curve to the left. A lower quantity would be sold at the same price. There would be no increase in availability. The supply curve would be dictated by the cost of production, not by the demand curve. The quantity demanded would be lower at every price level with no change in the cost of production. Thus, profits would decline.

Today's question: REG

When a principal debtor defaults and a surety pays the creditor the entire obligation, which of the following remedies gives the surety the best method of collecting from the debtor?

A) Exoneration

B) Contribution

C) Subrogation

D) Attachment

Correct answer: C

Explanation: The right of subrogation allows the surety to gain the creditor's rights, once the creditor has been paid in full. Subrogation would give a surety not only their own right to collect from the debtor (reimbursement), but also additional rights that the creditor might have had.

The remaining answer choices are incorrect for the following reasons:

• Exoneration would simply give a surety a court order demanding that the debtor pay. Exoneration does not confer additional collection rights against the debtor.
• Contribution is only available to one cosuretor against other cosuretors. It is not available against the debtor.
• Attachment is the right of all creditors to place a lien on a debtor's property so it will be available to satisfy a judgment. Subrogation is the better answer because it is specific to surety's collection rights against a debtor and gives the surety additional rights.