147 test bank for financial accounting a business process approach 3rd edition

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147 Test Bank for Financial Accounting A Business Process Approach 3rd Edition

True False Questions - Free Text Questions –

Multiple Choice Questions-Page 1

Which type of business organization finds it easiest to raise large amounts of capital?

1 A corporation

2 B partnership

3 C sole proprietorship

4 D Two of these are correct.

The outputs of a firm are its

1 A capital contributions

2 B services provided to customers

3 C delivery of products to customers

4 D Two or more of these are correct.

Huntington Bank is an example of a firm

3 C separation of ownership and management

4 D two or more of these

A service company

1 A is a wholesale business

2 B manufactures goods

3 C is a retail business

4 D None of these are correct.

Toyota is an example of a firm

1 A service

2 B merchandising

3 C manufacturing

4 D financial services

For which organization are owners typically separate from

managers and not involved in the day-to-day operations,

sometimes resulting in managers making decisions that are not

in the best interest of the owner(s.?

1 A sole proprietorship

2 B partnership

3 C corporation

4 D sole proprietorship and partnership

Which of the following is true about a sole proprietorship?

1 A A sole proprietorship is a company owned by two or more individuals.

2 B The owner's liability is limited to the amounts invested in the business.

3 C Income from a sole proprietorship is distributed to the owner in the form of a

dividend.

4 D The income from a sole proprietorship is taxed on the owner's personal income tax return.

Double taxation occurs because businesses pay

1 A sales tax and income tax

2 B property taxes and income taxes

3 C taxes on net income, and owners pay taxes on the remaining net income distributed

as dividends

4 D social security taxes for employees, and employees also pay the same amount for themselves

The two types of merchandising businesses include

1 A wholesale and retail

2 B service and financial

3 C manufacturing and retail

4 D service and wholesale

The governmental agency that monitors the stock market and the financial reporting of firms that trade in the market is the

1 A Financial Accounting Standards Board (FASB.

2 B Internal Revenue Service (IRS.

3 C Public Company Accounting Oversight Board (PCAOB.

4 D Securities and Exchange Commission (SEC.

The inputs of a firm include

1 A revenues

2 B liabilities

3 C inventory and supplies

4 D All of these are correct.

For which organization is there double taxation?

1 A sole proprietorship

2 B partnership

3 C corporation

4 D sole proprietorship, partnership and corporation

For which organization are the personal assets of the owners at risk?

1 A sole proprietorship

2 B partnership

3 C corporation

4 D sole proprietorship and partnership

Dell Inc.'s distribution of earnings to owners is called dividends Dell must be a

1 A sole proprietorship

2 B partnership

3 C corporation

4 D sole proprietorship or partnership

Stock sold for the first time is called

1 A issued

2 B traded

3 C capital

4 D dividends

Which of the following is true about a corporation?

1 A Corporations must have a minimum of two or more shareholders.

2 B Each individual shareholder has individual legal responsibility for the corporation's actions.

3 C Corporations are exempt from taxes; however, the shareholders are required to pay taxes on dividends received.

4 D Managers of corporations can be held responsible for the actions of the corporation.

The stock market is

1 A located in New York City

2 B the general term used to refer to all stock exchanges

3 C where the IRS is located

4 D where businesses become incorporated

The four types of business are

1 A service, wholesale, retail, and financial

2 B for profit, nonprofit, wholesale, and retail

3 C service, merchandising, manufacturing, and financial services

4 D financial, manufacturing, service, and wholesale

Which organization should keep its financial records separate from the personal financial affairs of the owner(s.?

A partnership

1 A is a business owned by two or more individuals

2 B has owners who are legally liable for everything the company does

3 C may be organized under a partnership agreement

4 D sole proprietorship and partnership

Target is an example of a firm

1 A service

2 B merchandising

3 C manufacturing

4 D financial services

When starting a business you should first

1 A write a business plan

2 B borrow from creditors

The owners of a corporation are called

1 A shareholders

2 B partners

3 C stockholders

4 D two or more of these

A business form in which the partners are not personally liable for the malpractice of any of the other partners is called a

1 A corporation

2 B limited liability partnership

3 C modified sole proprietorship

Financial services companies

1 A deal in services related to money

2 B sell insurance to their customers

3 C lend money to consumers to pay for cars and houses

4 D All of these are correct.

Which of the following is legally a separate entity from its

owner(s.?

1 A sole proprietorship

2 B partnership

3 C corporation

4 D Two of these are correct.

The United Way is an example of a

1 A is a legal entity separate from the owners

2 B is a manufacturer and not a service organization

3 C may cause unlimited liability for its shareholders

4 D provides goods or services for the sole purpose of helping people

Which of these businesses pays federal income taxes on its income?

A manufacturing business

1 A will lend money to customers

2 B buys goods for resale

3 C provides services to its customers

4 D makes the products it sells

Corporations are

1 A for-profit businesses only

2 B manufacturers and not service organizations

3 C owned by shareholders

4 D exempt from legal liability

Which type of business organization exposes its owner(s to unlimited liability?

1 A corporation

2 B partnership

3 C sole proprietorship

4 D Two of these are correct.

A business in the form of a sole proprietorship

1 A is separate and distinct from its owner

2 B is a separate legal entity

3 C files its own tax return

4 D is a company with a single owner

The law firm of Doolittle and Baroque is an example of a firm

1 A service

2 B merchandising

3 C manufacturing

4 D financial services

Advantages of the corporate form of business organization include

1 A double taxation

2 B limited liability for shareholders

3 C separation of ownership and management

4 D Two or more of these are correct.

A partnership agreement

1 A exempts partners from unlimited liability

2 B establishes the partnership as a separate legal entity

3 C details how much work partners will do and how they will split up the profits

4 D defines how many shares of stock the partnership may sell to investors

Ira Roth, CPA, is an example of a

1 A individual, group, and corporate

2 B sole proprietorship, partnership, and corporation

3 C service, manufacturing, and financial

4 D debtors, creditors, and owners

85 Free Test Bank for Financial Accounting A Business Process Approach 3rd Edition by Reimers Multiple

1 A $10,000

2 B $39,910

3 C $11,910

4 D $21,910

In 2012, Baroque, Inc., a U S corporation, earned profits of

$200,000 before taxes After paying federal income taxes of

30%, all of Baroque's after-tax income was paid to its only

shareholder The federal income tax rate on corporate dividends

is 15% How much tax will Baroque's shareholder pay on these dividends?

1 A $21,000

2 B $30,000

3 C $60,000

4 D $102,000

Net income flows from

1 A the income statement to the statement of changes in shareholders' equity

2 B the income statement to the balance sheet

3 C the balance sheet to the statement of cash flows

4 D the statement of cash flows to the income statement

Wok N Roll, Inc shows $300,000 of assets and $60,000 of

shareholders' equity on its balance sheet Liabilities must equal

1 A $360,000

2 B $300,000

3 C $240,000

4 D $60,000

The four financial statements used to report a company's

financial condition include

1 A balance sheet, income statement, statement of changes in shareholders' equity, and statement of cash flows

2 B changes in balance sheet, statement of flows, statement of changes in balances, and statement of cash flows

3 C balance sheet, statement of earnings, statement of changes in shareholders' equity, and statement of budgets

4 D income sheet, balance of earnings, statement of changes in shareholders' equity, and statement of cash flows

The missing name (a of Lox Stock & Bagel Company's

financial statement above is the

1 A Balance sheet

2 B Income statement

3 C Statement of changes in shareholders' equity

4 D Statement of cash flows

The stock exchange is

1 A where all companies must register to exchange goods and services

2 B regulated by the Securities and Exchange Commission (SEC.

3 C regulated by the Internal Revenue Service (IRS.

4 D regulated by the Public Company Accounting Oversight Board (PCAOB.

Team Shirts, Inc repays a $2,000 loan This transaction

1 A causes total assets to increase

2 B causes total liabilities to decrease

3 C is an investing activity

4 D causes total shareholders' equity to increase

Which financial statement shows Inventory?

1 A balance sheet

2 B income statement

3 C statement of changes in shareholders' equity

4 D statement of cash flows

For the month of June, Team Shirts, Inc., received $6,000 in contributed capital, $3,000 in sales revenue, paid $2,000 in

expenses, and $500 in dividends Its net income was

1 A the amount earned from providing goods to customers

2 B the amount received from borrowing

3 C the amount earned from providing services to customers

4 D two or more of these

How many of a company's four financial statements report information about the company at a specific point in time?

1 A describes the financial situation of a company at a specific point in time

2 B is a summary of all of the revenues minus all of the expenses for an accounting period

3 C shows the changes that took place in the amount of shareholders' equity during a period

4 D is a list of all the cash collected and cash paid during a period

Which of the following increases retained earnings?

1 A issuance of stock

2 B revenues

3 C purchase of inventory

4 D dividends

The stock exchange is

1 A where companies may issue stock

2 B regulated by the Securities and Exchange Commission (SEC.

3 C where buyers and sellers exchange their shares of stock.

4 D All of these are correct.

The statement of cash flows

1 A describes the financial situation of a company at a specific point in time

2 B is a summary of all of the revenues minus all of the expenses for an accounting period

3 C shows the changes that took place in the amount of shareholders' equity during a period

4 D is a list of all the cash collected and cash paid during a period

The Cash balance (b in Lox Stock & Bagel Company's financial statement above is

1 A the same as the retained earnings

2 B $39,910

3 C $3,000

4 D $10,910

How many of a company's four financial statements report

information about the company over a specific period of time?

1 A the same as expenses

2 B a reduction in retained earnings

3 C owners' contributions to the firm

4 D another term for each partner's share of partnership income

A single-step income statement

1 A is the preferred method of reporting revenues, expenses, and cash because of the ease of preparation

2 B groups all revenues together and shows all expenses deducted from total revenue

3 C includes the subtotal Gross profit in the presentation

4 D is preferred by business owners because the information presented is timely, and thus useful

Using Lox Stock & Bagel Company's financial statement above, determine the amount of the company's largest resource

1 A $11,910

2 B $39,910

3 C $18,000

4 D $25,000

On March 1, Team Shirts had a beginning balance in retained earnings of $1,200 During March, Team Shirts paid $200 in

dividends and had net income of $2,000 The March 31 balance

in retained earnings was

1 A $3,000

2 B $3,200

3 C $3,400

4 D $1,200

The Team Shirts' balance sheet has assets of $6,500 and

liabilities of $4,000 Its shareholders' equity is

1 A causes total assets to increase and total liabilities to increase

2 B causes total liabilities to increase and retained earnings to decrease

3 C is a report prepared by the Internal Revenue Service (IRS.

4 D is two or more of these

Comparative balance sheets

1 A include balances of two consecutive years

2 B include gross profit and operating income

3 C report financial ratios for the current year which are compared to the prior year's

4 D report revenues for both the current and previous years

Using Lox Stock & Bagel Company's financial statement above, determine the amount that represents the earnings kept in the company

1 A the Cash balance

The statement of changes in shareholders' equity

1 A describes the financial situation of a company at a specific point in time

2 B is a summary of all of the revenues minus all of the expenses for an accounting period

3 C shows the changes that took place in the amount of shareholders' equity during a period

4 D is a list of all the cash collected and cash paid during a period

In which of the following are the owners' or owner's personal assets at risk if the business does not have enough money to pay its liabilities?

1 A sole proprietorship

2 B partnership

3 C corporation

4 D Two of these are correct.

Audited financial statements have been examined by

1 A owners

2 B Certified Public Accountants (CPAs.

3 C Internal Revenue Service (IRS agents

4 D Securities and Exchange Commission (SEC examiners

During the year, The Mane Event, Inc had sales of $300,000 and had expenses of $240,000 The owners were paid $20,000 in dividends Net income for the year equals

1 A gets cash and gives up stock

2 B gets stock and gives up cash

3 C gets ownership and gives up contributed capital

4 D is an operating activity

Which of the following statements reports the line item Gross profit?

1 A the single-step income statement

2 B the multistep income statement

3 C the single-step balance sheet

4 D the multistep balance sheet

Using Lox Stock & Bagel Company's financial statement above, determine the amount of the creditors' claims to the company's resources

1 A describes the financial situation of a company at a specific point in time

2 B is a summary of all of the revenues minus all of the expenses for an accounting period

3 C shows the changes that took place in the amount of shareholders' equity during a period

4 D is a list of all the cash collected and cash paid during a period

Mia Hero, Inc had a retained earnings balance of $7,000 on December 31, 2011 For the year 2012, sales revenues are

$15,000 and expenses are $13,000 If no dividend is declared or paid in 2012, retained earnings at December 31, 2012 equals

1 A $9,000

2 B $10,000