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Free Sample Questions
 AUD | BEC | FAR | REG

AUD QUESTIONS:

197. If the seller has voidable title, s/he may transfer a valid title to a good faith purchaser who takes for value and without notice. A voidable title can be created by a person receiving goods if: 1) the delivery was procured through fraud, 2) the delivery was in exchange for a check that was later dishonored, 3) the delivery was to be for cash and no cash was paid, and 4) __________________________________.
a. All attempts at delivery were dishonored
b. The seller was deceived as to purchaser’s identity
c. The arrangements for payment were ill-advised
d. An intention to deceive on the part of the title giver
e. The title was not signed in front of a third party


Answer: b.
Explanation: The seller was deceived as to purchaser’s identity

192. An agent’s actual authority is that power consented to by the principal that affects the principal’s legal restrictions. If losses to the principal result from the agent portraying more authority that is present, the agent ___________________________ __________________________.
a. Engages an attorney to address the court
b. Is liable for the amount exceeding actual authority
c. Must return the losses to the client
d. Fails to complete the transaction for the client
e. Is limited in his or her attempts for redress

b. Is liable for the amount exceeding actual authority

38. Auditors should request that an audit client send a letter of inquiry to those solicitors who have been consulted concerning litigation or claims (AUS 508, ISA 501). The primary reason for this request is to provide
A. corroborative evidential matter
B. information concerning the progress of cases to date
C. an estimate of the dollar amount of the probable loss
D. an expert opinion as to whether a loss is possible, probable or remote.

Answer: A
Explanation: The primary reason for this request is to provide corroborative evidential matter.

40. Six months after issuing an unqualified opinion on a set of financial statements, the audit partner discovered that the engagement personnel on the audit failed to confirm several of the client's material accounts receivable balances. The audit partner should first
A. inquire whether there are persons currently relying, or likely to rely, on the unqualified opinion.
B. assess the importance of the omitted procedures to the auditor's ability to support the previously expressed opinion.
C. perform alternative procedures to provide a satisfactory basis for the unqualified opinion.
D. request permission of the client to undertake the confirmation of accounts receivable.

Answer: B
Explanation: The audit partner should first assess the importance of the omitted procedures to the auditor's ability to support the previously expressed opinion.

41. Subsequent to the issuance of the auditor's report, the auditor became aware of facts existing at the report date that would have affected the report had the auditor then been aware of them. After determining that the information is reliable, the auditor should next
A. notify the board of directors that the auditor's report must no longer be associated with the financial statements.
B. determine whether there are persons relying, or likely to rely, on the financial statements who would attach importance to the information.
C. request that management discloses the effects of the newly discovered information by adding a note to subsequently issued financial statements.
D. issue revised pro-forma financial statements, taking into consideration the newly discovered information.

Answer: C
Explanation: The auditor should request that management discloses the effects of the newly discovered information by adding a note to subsequently issued financial statements.

24. What type of questionnaire’s objective is to determine if the types of goods and services to be obtained, the manner in which they are obtained, the vendors from which they are obtained, the quantities to be obtained, and the prices and terms initiated and executed are in accordance with management authorizations

A. Revenue and Receivables
B. Accounting system
C. Purchases and account payable
D. Cash receipts

Answer: C
Explanation: The purchases and accounts payable questionnaire’s objective is to determine if the types of goods and services to be obtained, the manner in which they are obtained, the vendors from which they are obtained, the quantities to be obtained, and the prices and terms initiated and executed are in accordance with management authorizations

54. In the planning of an audit, it was decided that cash would not be audited because it comprised only 1 per cent of total assets. How would you respond to this decision?
A. Whether or not this was acceptable would depend on the company and the type of industry.
B. Cash is always going to be material, no matter what amount it is.
C. An amount of 1 per cent of total assets is likely to be immaterial.
D. It is probable that this amount would still be considered material, due to the nature of cash.

Answer: D
Explanation: It is probable that this amount would still be considered material, due to the nature of cash.

1. After the auditing process, the auditor is required to express an opinion regarding the entity’s financial statements, financial position, conformity with GAAP, and cash flows. In which of the following opinions can SCOPE RESTRICTIONS (not material by circumstance) be a reason for writing an explanatory paragraph?

A. unqualified
B. qualified
C. disclaimer
D. adverse
E. disqualified

Answer: B
Explanation: B is a reason that requires an explanatory paragraph to be written in a qualified opinion.

5. An independent auditor plans, conducts, and reports the results of an audit in accordance with generally accepted auditing standards (GAAS). Which of the following is required under the Standards of Field Work section of the GAAS?

A. Auditing must be performed by a person with adequate technical training.
B. Financial Statements are consistent with GAAP.
C. Auditor must have sufficient understanding of internal control.
D. Due professional care is crucial in planning and performing the audit.
E. Auditor needs independence in mental attitude.


Answer: C
Explanation: C is required under the Standards of Field Work section of the GAAS.

23. The auditor must either express an opinion regarding the financial statements, taken as a whole, or state that an opinion cannot be expressed, in the auditor's report. When the auditor cannot express an overall opinion, he or she should:

A. state the reasons why he cannot express an overall opinion in the auditor's report
B. state the reasons why he cannot express an overall opinion in a separate memo to the company
C. state the reasons why he cannot express an overall opinion in a separate memo to the government
D. state the reasons why he cannot express an overall opinion in a separate memo to the auditing board
E. not do anything at all and just leave the opinion page blank to avoid misconduct

Answer: A
Explanation: State the reasons why he cannot express an overall opinion in the auditor's report.

BEC QUESTIONS

53. Monopolistic Competition involves a large number of sellers, differentiated products, relatively easy entry into and exit from the market for firms, some price control and _____________________________________.
a. considerable non-price competition
b. no non-price competition
c. marginal marketing competition
d. considerable marketing competition
ANSWER: a.
Explanation: Monopolistic Competition involves a large number of sellers, differentiated products, relatively easy entry into and exit from the market for firms, some price control and considerable non-price competition.


34. As the ____________________ approaches 1, we are given a higher level of assurance the independent variable accounts for most of the variability in the dependent variable.
a. coefficient of correlation
b. variable correlation coefficient
c. coefficient of linearity
d. coefficient of determination
ANSWER: d.
Explanation: As the coefficient of determination approaches 1, we are given a higher level of assurance the independent variable accounts for most of the variability in the dependent variable.

90. Top-down planning is typical, with ____________________ developing five-year plans with input from consultants and the planning group, but with minimal direct input from lower-level management.
a. mid –level management
b. top management
c. boards of directors
d. strategic planning group
ANSWER: b.
Explanation: Top-down planning is typical, with top management developing five-year plans with input from consultants and the planning group, but with minimal direct input from lower-level management.

65. Amendments to corporate articles requiring approval by an absolute majority of shareholders include merger, _____________, dissolution or sale of a substantial part of corporate assets.
a. consolidation
b. expansion
c. workman’s compensation
d. unemployment insurance
ANSWER: a.
Explanation: Amendments to corporate articles requiring approval by an absolute majority of shareholders include merger, consolidation, dissolution or sale of a substantial part of corporate assets.

90) Expansion of the money supply that results from a bank's ability to lend significantly in excess of it's reserves causing
an phenomena where that income is spent several different times. This is known as the...?
a) multiplied increase rule
b) tax multiplier coefficient
c) open market operations
d) multiplier effect
e) increased consumption effect
ANS – D
EXP -Multiplier Effect-Any increase in autonomous investment, consumption, or government spending results in a multiplied increase in national income. The same income is spent several times. The impact of this effect is determined by the marginal propensity to save.

29) While the investment team of The KAT Corporation agrees that the return on investment measures the relationship of
profit to invested capital for a unit of accountability, what they don't agree on is how this can be achieved. Which of
the following are not factors of operating income / average invested capital
a) return is increased when operating income increases
b) the firm uses its capital to generate profit
c) returns increase when average invested capital decreases
d) operating income increases when costs decrease
e) the sum of dividends paid plus capital gains
ANS – E
EXP-The return on investment measures the relationship of profit to invested capital for a unit of accountability. The return on investment is increased when operating income increases or average invested capital decreases. Return on investment decreases when operating income decreases or average capital increases. Operating income increases when costs decrease or decrease when costs increase. It = Operating income / Avg Invested capital

30) To define their net operating profit after tax the shareholders decide to use the equation for economic value added
which of the following is not a factor to be considered in the equation?
a) operating profit times one minus tax rate
b) opportunity cost interest rate for community capital
c) rate of return in excess
d) employed equity capital
e) employed debt
ANS – C
EXP -Economic Value Added-Net Operating profit after tax less the opportunity cost of capital. It = Operating Profit X (1-tax rate) – (opportunity cost interest rate for equity capital X employed equity capital) – (opportunity cost interest rate for debt X employed debt)

31) If Zach is computing the equation, operating income minus (inputed interest rate times average investment capital he is
basically trying to figure out residual income. Which of the following relates to residual income?
a) a unit earns a rate of return in excess of the imputed interest charge
b) a combination of term loans, bonds, and preferred stock
c) dividends paid plus capital gains
d) PV of cash flows / initial investment
e) the cost of initial investment
ANS – A
EXP -Residual Income-As long as the accounting unit earns a rate of return in excess of the imputed interest charge for invested capital, the unit should expand. It = Operating Income – (imputed interest rate X avg invested capital)


FAR QUESTIONS:

365. Debt to Equity=Total Liabilities/Owner’s Equity. Measures the relative amounts of resources provided by creditors and owners. Long-Term Solvency is ability to meet interest payments and preferred dividends. Which is also related with this?

A. Other variable costs.
B. Other initial costs.
C. Other fixed costs.
D. Other maintenance costs.
ANS: C
EXP: Long-Term Solvency-Ability to meet interest payments, preferred dividends, and other fixed costs. Debt to Equity=Total Liabilities/Owner’s Equity. Measures the relative amounts of resources provided by creditors and owners.

366. Times Interest Earned=Income before taxes and interest/Interest. Ability to meet interest payments. Adequacy of current earnings for payment of preferred dividends is related to Times preferred dividends earned. What is Times preferred dividends earned?

A. CL/Annual Preferred Dividend Requirement.
B. CA/Annual Preferred Dividend Requirement.
C. NI/Annual Preferred Dividend Requirement.
D. NA/Annual Preferred Dividend Requirement.
ANS: C
EXP: Times Interest Earned=Income before taxes and interest/Interest. Ability to meet interest payments. Times preferred dividends earned=NI/Annual Preferred Dividend Requirement. Adequacy of current earnings for payment of preferred dividends.

367. Operational Efficiency=Ability of the business entity to generate income as well as efficiency and effectiveness in using the assets employed. Indications of the efficiency of credit policies and collection procedures, and of the quality of receivables are related to Receivables Turnover. Which one is Receivables Turnover?


A. Net Credit Sales/Avg Net Receivables.
B. Net Credit Sales/Avg Net Payables.
C. NI/Annual Preferred Dividend Requirement.
D. NA/Annual Preferred Dividend Requirement.

ANS: A
EXP: Operational Efficiency=Ability of the business entity to generate income as well as efficiency and effectiveness in using the assets employed. Receivables Turnover=Net Credit Sales/Avg Net Receivables. Indication of the efficiency of credit policies and collection procedures, and of the quality of receivables.

368. BV Per Common Share=Common Stockholders’ Equity/# of Common Shares Outstanding. Preferred stock must be subtracted out. Cumulative preferred stock dividends in arrears must also be subtracted. Which affects the denominator as the # of common shares outstanding is reduced?

A. Secondary stock.
B. Primary stock.
C. Tertiary stock.
D. Treasury stock.

ANS: D
EXP: BV Per Common Share=Common Stockholders’ Equity/# of Common Shares Outstanding. Preferred stock must be subtracted out. Cumulative preferred stock dividends in arrears must also be subtracted. Treasury stock affects the denominator as the # of common shares outstanding is reduced.

369. BV Per Preferred Share=Preferred Stockholders’ Equity/# of Preferred Shares Outstanding. Preferred Stockholders’ Equity is made up of 1) Preferred stock at the greater of its liquidation, par or stated value and the second point is-


A. Secondary stock dividends in arrears.
B. Primary stock dividends in arrears.
C. Cumulative preferred stock dividends in arrears.
D. Preferred stock dividends in arrears.

ANS: C
EXP: BV Per Preferred Share=Preferred Stockholders’ Equity/# of Preferred Shares Outstanding. Preferred Stockholders’ Equity is made up of 1) Preferred stock at the greater of its liquidation, par or stated value and 2) cumulative preferred stock dividends in arrears.

400. There are so many foreign currency designation hedges and their designation can be given as FV Hedge, Cash Flow Hedge. Which one of the following also includes this?

A. Hedge on Net Investment in a Foreign Operation
B. Hedge on net profit in a foreign operation
C. Hedge on net loss in a foreign investment
D. Hedge on net glow in a foreign investment

ANS: A
EXP: Foreign Currency Hedges -Hedge Designation-FV Hedge, Cash Flow Hedge, Hedge on Net Investment in a Foreign Operation.

401. Business Combinations is usually necessary for a fair presentation when one of the companies in the group has a controlling interest in the other companies. All majority-owned subsidiaries s/b consolidated, unless specifically exempted. What is true about controlling interest of one of the companies in the group to the other companies?
A. Directly has a controlling interest
B. Indirectly has a controlling interest.
C. Directly or indirectly has a controlling interest.
D. Has no controlling interest.
ANS: C
EXP: Business Combinations
Overview-Usually necessary for a fair presentation when one of the companies in the group directly or indirectly has a controlling interest in the other companies. All majority-owned subsidiaries s/b consolidated, unless specifically exempted.

402. Business Combinations is usually necessary for a fair presentation when one of the companies in the group directly or indirectly has a controlling interest in the other companies. All majority-owned subsidiaries s/b consolidated, unless specifically exempted. When business combinations do not occurs?
A. when an entity acquires net assets or equity interests of one or more other businesses
B. Obtains control over that or other entities
C. When an entity acquires net assets or equity interests of one or more other businesses and obtains control over that or other entities
D. When an entity does not acquire net assets or equity interests of one or more other businesses and does not obtain control over that or other entities.
ANS: D
EXP: Occurs when an entity acquires net assets or equity interests of one or more other businesses and obtains control over that or other entities.

403. Business Combinations is usually necessary for a fair presentation when one of the companies in the group directly or indirectly has a controlling interest in the other companies. All majority-owned subsidiaries s/b consolidated, unless specifically exempted. When a majority owned subsidiary should not be consolidated?
A. If control doesn’t rest with the majority owner.
B. If control rest with the majority owner.
C. If control rest or doesn’t rest with the majority owner.
D. Majority owner is not a fact here.
ANS: A
EXP: A majority owned subsidiary should not be consolidated if control doesn’t rest with the majority owner. Consolidation of majority-owned subsidiaries is required even if they have non homogeneous operations, a large minority interest, or a foreign location.


404. Business Combinations is usually necessary for a fair presentation when one of the companies in the group directly or indirectly has a controlling interest in the other companies. A majority owned subsidiary should not be consolidated if control doesn’t rest with the majority owner. When consolidation of majority-owned subsidiaries is not required?
A. If they have non homogeneous operations.
B. A large minority interest.
C. Foreign location.
D. No interest.
ANS: D
EXP: A majority owned subsidiary should not be consolidated if control doesn’t rest with the majority owner. Consolidation of majority-owned subsidiaries is required even if they have non homogeneous operations, a large minority interest, or a foreign location.


405. Business Combinations is usually necessary for a fair presentation when one of the companies in the group directly or indirectly has a controlling interest in the other companies. All majority-owned subsidiaries s/b consolidated, unless specifically exempted. Is it true that Goodwill is similar to any excess of the purchase price over the FV of the net identifiable assets is recorded as goodwill?
A. Yes.
B. No.
C. Goodwill means kindly feeling.
D. Intension that good will result.
ANS: A
EXP: Goodwill-Any excess of the purchase price over the FV of the net identifiable assets is recorded as goodwill.


406. Equity Interests is an acquiring corporation may acquire ownership by obtaining a majority of the common stock. The separate legal entity is still preserved. Who may negotiate with management to obtain assets of the company?
A. The acquiring corporation.
B. Manager.
C. Investor.
D. Loan provider.
ANS: A
EXP: Assets: The acquiring corporation may negotiate with management to obtain assets of the company. Upon consumption, the acquired company ceases to exist as a separate economic, legal, and accounting entity.


407. The acquiring corporation may negotiate with management to obtain assets of the company. Upon consumption, the acquired company ceases to exist as what not from the following?
A. A separate economic entity.
B. Legal entity.
C. Accounting entity.
D. Pleasure entity.
ANS: D
EXP: Assets: The acquiring corporation may negotiate with management to obtain assets of the company. Upon consumption, the acquired company ceases to exist as a separate economic, legal, and accounting entity.


408. The acquiring corporation may negotiate with management to obtain assets of the company. Upon consumption, the acquired company ceases to exist as a separate economic, legal, and accounting entity. How an acquiring corporation may acquire ownership?
A. By obtaining a majority of the common stock.
B. By obtaining a few of the common stock.
C. Buying assets.
D. Selling assets.
ANS: A
EXP: Equity Interests: An acquiring corporation may acquire ownership by obtaining a majority of the common stock. The separate legal entity is still preserved. The subsidiary continues to maintain its own separate set of books. This creates the need for consolidated statements.

REG QUESTIONS:


65. Automatic Stay is a fundamental debtor protection that prevents all collection efforts, all harassment, and all foreclosure or other legal proceedings. An automatic stay does not vitiate the rights of creditors. The stay of any other act continues until the earliest of the time the case is closed, ______________.

a. the parties have met such a requirement
b. has been filed against the debtor or the partnership
c. a Statute of Frauds defense is raised by the defendant
d. the case is dismissed, or a discharge is approved or denied

d. the case is dismissed, or a discharge is approved or denied
In bankruptcy law, an automatic stay is an automatic injunction which halts actions by creditors, with certain exceptions, to collect debts from a debtor who has declared bankruptcy.

66. Fair Credit Reporting Act requires credit reporting agencies to follow reasonable procedures to guarantee maximum possible accuracy in reporting consumer credit histories and bans the agencies from including inaccurate or outdated information in consumer reports. This act provides __________________.

a. the plaintiff's expenditure in conducting a fruitless search for the vessel could be awarded
b. has been filed against the debtor or the partnership
c. to challenge inaccurate or incomplete information for individuals
d. the parties expressly state that they do not want to be bound

c. to challenge inaccurate or incomplete information for individuals
The Fair Credit Reporting Act (FCRA) is an American federal law (codified at 15 U.S.C. 1681 et seq.) that regulates the collection, dissemination, and use of consumer information, including consumer credit information.

67. ________________ when a debtor defaults on its payments to an unsecured creditor. They may: 1) take a writ of attachment (property will be seized to secure payment), 2) take an order of garnishment (gain access to assets detained by third party to assure unpaid debt), or 3) take judgment and implement it by execution (nonexempt property is charged upon or seized and sold to satisfy the judgment)

a. the creditor may introduce legal action
b. the parties have met such a requirement
c. debtor making monthly payments for a maximum of five years
d. several months or even years pass between the financial problems and the start of bankruptcy proceedings

a. the creditor may introduce legal action

68. Assignment for the Benefit of Creditors (ABC) is the transfer of all the debtor’s nonexempt assets to another person in trust which is the assignee and ______________.

a. liquidates the assets and distributes the proceeds to the creditors
b. a Statute of Frauds defense is raised by the defendant
c. the circumstances imply that parties have reached an agreement
d. it is presented to the judge
a. settles the assets and allocates the earnings to the creditors

69. Equal Credit Opportunity Act of 1974 bans all businesses regularly enlarging credit from discriminating against any applicant on the basis of _______________. Remedies include actual and punitive damages plus attorneys’ fees.

a. the court will formally grant the debtor a discharge of the debts provided for in the plan
b. the carrier under a duty to issue the bill of lading
c. sex, marital status, race, color, religion, natural origin, or age
d. price of a promise and is a controversial requirement for contracts under common law

c. sex, marital status, race, color, religion, natural origin, or age

70. A composition agreement is _______________ an immediate or early payment of a lesser sum in complete satisfaction of the debt because of them.

a. circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance
b. this jurisdiction could be delegated to the bankruptcy court
c. important information about their assets and liabilities
d. an contract between a debtor and its creditors in which the participating creditors consent to acknowledge

d. a contract between a debtor and its creditors; in which the participating creditors consent to acknowledge

71. An extension is a contract between a debtor and its creditors in which ___________________, but extends it over a period beyond the due date. Equity Receivership is a court-supervised liquidation of restructuring that doesn’t differentiate the debtor from debts.

a. the parties have met such a requirement
b. Cost, Insurance and Freight
c. civil law systems typically apply certain over-arching principles to disputes arising out of contract
d. the participating creditors get complete payment of their claims

d. the participating creditors get complete payment of their claims

72. For an underlying obligation securing payment or other performance a lien is an interest in property. Liens which are created with the debtor’s consent are consensual liens. When _________________ or a right against a surety in return for a loan or credit sale these liens are created.

a. it is presented to the judge
b. a Statute of Frauds defense is raised by the defendant
c. the debtor agrees in giving the creditor a right to some personnel or the real estate
d. the circumstances imply that parties have reached an agreement

c. the debtor agrees in giving the creditor a right to some personnel or the real estate

73. An agreement of the composition is an agreement between a debtor and its creditors in which the creditors that participate agree in accepting an immediate one or ___________.

a. Value must be given by the secured party and the debtor must have the rights in the collateral
b. the plaintiff's expenditure in conducting a fruitless search for the vessel could be awarded
c. the parties expressly state that they do not want to be bound
d. early payment of a lesser sum in full satisfaction of the debt due to them

d. early payment of a lesser sum in full satisfaction of the debt due to them

74. The Contract of Suretyship is an agreement by which ____________ on the defect of the debtor. The Contract of Suretyship should have tribute and valid acceptance.

a. a person assures the debt of another assuring performance
b. has been filed against the debtor or the partnership
c. civil law systems typically apply certain over-arching principles to disputes arising out of contract
d. accepted by the bank on which it’s drawn

a. a person assures the debt of another assuring performance
A surety contract is an agreement in which one party, called the surety, accepts the responsibility for someone else's contractual obligations

9. If an individual must "take" the "means test", ______________ and secured debt payments in a very complicated computation that may or may not exactly reflect the actual monthly budget of that individual.

a. their average monthly income over this 180 day period is decreased to a series of allowances for living wage expenses
b. the informal procedure of small claims court, and you will have to learn
c. the injured party cannot prove that the person believed to have caused the injury acted with negligence, at the very least
d. an agreement by one party to buy her/his “requirements” of a certain product from a certain supplier

a. their average monthly income over this 180 day period is decreased to a series of allowances for living wage expenses
The term means test refers to an analytical process accepted to decide whether or not an individual or family is eligible to meet the criteria for help from the government.

10. Bankruptcy statistics are also a straggling indicator. There is a time delay between financial complexities and liquidation. In most cases, _______________. Legal, tax, and cultural issues may further distort bankruptcy figures, particularly when comparing on an international basis.

a. a person seeking to sue another for liability under a warranty had to be in privity
b. several months or even years go by between the financial problems and the start of insolvency procedures
c. the seller put and hold conforming goods at the buyer’s disposition
d. the contract is avoided if the loss is total, or if partial loss the buyer can either avoid the contract

b. several months or even years go by between the financial problems and the start of insolvency procedures
Bankruptcy is a legally declared inability or impairment of ability of an individual or association to pay its creditors. Creditors may file a bankruptcy appeal against a debtor ("involuntary bankruptcy") in an attempt to recover a part of what they are allocated or initiate a restructuring

11. Creditor's rights is a legal term used to illustrate the set of procedural provisions planned to ________________ persons who are owed money - to collect the money that they are payable.

a. protect the ability of creditors
b. promise to do either, given by one party to a contract in exchange for another party’s act
c. the buyer’s duty to accept and pay for the goods
d. the MP at the time and place for tender and the contract price, plus incidental damages

a. protect the ability of creditors
A creditor is a party (e.g. person, organization, company, or government) that has an argument to the services of a second party. It is a person or organization to whom money is payable.

12. Creditor's rights not only deal with the rights of creditors against the debtor, but also with ________________.

a. a condition precedent to promisor’s performance, failure of consideration, incapacity, and failure
b. the informal procedure of small claims court, and you will have to learn
c. the severity of the disciplinary action
d. also with the rights of creditors against one another

d. the rights of creditors against one another
A creditor is a party (e.g. person, organization, company, or government) that has a claim to the services of a second party. It is a person or institution to whom money is owed

 
   
 


 
 
 
 
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