|
The proprietorship form of business organization |
generally receives favorable tax treatment relative to a corporation. |
|
A business organized as a corporation |
is owned by its stockholders. |
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The partnership form of business organization |
is a common form of organization for service-type businesses. |
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Which of the following is not one of the three forms of business organization? |
Investors |
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Most business enterprises in the United States are |
proprietorships and partnerships. |
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A business organized as a separate legal entity is a |
corporation. |
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Which of the following is not an advantage of the corporate form of business organization? |
Favorable tax treatment |
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An advantage of the corporate form of business is that |
its ownership is easily transferable via the sale of shares of stock. |
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Which of the following is an advantage of corporations relative to partnerships and sole proprietorships? |
Reduced legal liability for investors |
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A corporation has which of the following set of characteristics? |
Easier to transfer ownership and raise funds, no personal liability |
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A small neighborhood barber shop that is operated by its owner would likely be organized as a |
proprietorship. |
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A local retail shop has been operating as a sole proprietorship. The business is growing and now the owner wants to incorporate. Which of the following is not a reason for this owner to incorporate? |
The prestige of operating as a corporation |
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All of the following are advantages for choosing a proprietorship for a business except |
transfer of ownership is easily achieved through stock sales. |
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Jack and Jill form a partnership. Jack runs the business in New York, while Jill vacations in Hawaii. During the time Jill is away from the business, Jack increases the debts of the business by $20,000. Which of the following statements is true regarding this debt? |
Both Jack and Jill are personally liable for the business debt. |
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Which one of the following questions is most likely asked by an internal human resources director for the company? |
What average pay raise is affordable for employees this year? |
|
External users of accounting information, like the Internal Revenue Service, are most commonly known as |
taxing authorities. |
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Which of the following statements is not true regarding the Sarbanes-Oxley Act (SOX)? |
The Act calls for decreased independence of outside auditors reviewing corporate financial statements. |
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Which of the following would not be considered an internal user of accounting data for the Xanadu Company? |
President of the employees’ labor union |
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Which of the following groups uses accounting information primarily to insure the entity is operating within prescribed rules? |
Regulatory agencies |
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Which of the following groups uses accounting information to determine whether the company can pay its obligations? |
Creditors |
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Which type of corporate information is readily available to investors? |
Amount of net income retained in the business |
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The liability created by a business when it purchases coffee beans and coffee cups on credit from suppliers is termed a(n) |
account payable. |
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The right to receive money in the future is called a(n) |
account receivable. |
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Borrowing money is an example of a(n) |
financing activity. |
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Issuing shares of stock in exchange for cash is an example of a(n) |
financing activity. |
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Debt securities sold to investors that must be repaid at a particular date some years in the future are called |
bonds payable. |
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Expenses are incurred |
to generate revenues. |
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The cost of assets consumed or services used is also known as |
an expense. |
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Resources owned by a business are referred to as |
assets. |
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Which of the following is not a liability? |
Accounts Receivable |
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Which of the following financial statements is divided into major categories of operating, investing, and financing activities? |
The statement of cash flows. |
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Ending retained earnings for a period is equal to beginning |
Retained earnings + Net income – Dividends |
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Dividends are reported on the |
retained earnings statement. |
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Dividends paid |
decrease retained earnings. |
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To show how successfully your business performed during a period of time, you would report its revenues and expenses in the |
income statement. |
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Net income results when |
Revenues > Expenses. |
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Net income will result during a time period when |
revenues exceed expenses. |
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Which of the following financial statements is concerned with the company at a point in time? |
Balance sheet |
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Which financial statement is prepared first? |
Income statement |
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An income statement shows |
revenues, expenses, and net income. |
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Henson Company began the year with retained earnings of $330,000. During the year, the company recorded revenues of $500,000, expenses of $380,000, and paid dividends of $40,000. What was Henson’s retained earnings at the end of the year? |
$410,000 X Solution: $330,000 + ($500,000 − $380,000) − $40,000 = $410,000 |
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Finney Company began the year by issuing $40,000 of common stock for cash. The company recorded revenues of $370,000, expenses of $320,000, and paid dividends of $20,000. What was Finney’s net income for the year? |
$50,000 X $370,000 – $320,000 = $50,000 |
|
A balance sheet shows |
assets, liabilities, and stockholders’ equity. |
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