Aaron Takes $100 Out of His Checking Account and Puts

question 44

Multiple Choice

Aaron takes $100 out of his checking account and puts it in his savings account while Biff withdraws $200 from his money-market mutual fund in the form of cash.The total effect is that M1 ____and M2 ____.

• A)is unchanged; falls by $100
• B)is unchanged; is unchanged
• C)rises by $100; falls by $100
• D)rises by $100; is unchanged

Understand the legal liability of accountants and auditors in the professional practice.

Identify the conditions under which a CPA can be held liable for negligence, fraud, and scienter.

Distinguish between different legal doctrines and rules (e.g., Ultramares rule, Restatement (Second) of Torts) that affect accountant liability.

Recognize the role of privity of contract and the impact of third-party users on accountant's liability.

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Definitions:

Future Value

The value of an investment at a future date, considering compound interest or returns over time.

Amortized Loans

Loans that are paid off over time through a series of fixed, regular payments where part of each payment covers the interest expense and the remaining amount reduces the principal balance.

Balloon Payment

A large, one-time payment made at the end of a loan term to pay off the remaining balance, typically used in mortgage or bond agreements.

Principal

The initial amount of money borrowed or invested, excluding any interest or dividends.