acct 2110 test 1 chapter 1 – Flashcards
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The objective of most businesses is to maximize profits.
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True
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A limited liability corporation combines attributes of a partnership and a corporation.
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True
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A partnership is owned by two or more individuals
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True
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Manufacturing businesses change basic inputs into products that are sold to individual customers.
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True
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Merchandising businesses produce products rather than provide services to customers.
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False
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A corporation is a business that is legally separate and distinct from its owners.
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True
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The popularity of the sole proprietorship is due to the ease and low cost of organizing.
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True
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Large corporations such as ExxonMobil and Walmart are organized as limited liability corporations.
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True
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Over 90% of the total dollars of business receipts are received by proprietorships.
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False
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Merchandising businesses must be corporations.
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False
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Accounting is thought to be the "language of business" because business information is communicated to stakeholders.
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True
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Stockholders in a corporation are internal stakeholders.
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False
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Porsche is an example of a business that uses a premium-price emphasis to attract customers.
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True
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Companies using a low-cost emphasis provide products and services that compete on features other than price.
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False
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A business stakeholder has an interest in the economic performance of a business.
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True
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Creditors have preference to assets behind stockholders if a business fails
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False
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A liability is a legal obligation to repay the amount borrowed according to the terms of the borrowing agreement.
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True
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The basic type of stock issued to owners is called common stock
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True
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Assets are acquired through investing activities when resources are purchased.
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True
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The Stockholders' Equity of a company should equal the total of its Total Assets and Total Liabilities
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False
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The Balance Sheet represents the accounting equation.
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True
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1. What is the primary objective of most businesses? a.To maximize profits b.To pay dividends to stockholders c.To provide a benefit to society d.To manufacture a quality product
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A
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Which of the following would NOT be an example of a merchandising business? a.Ford Motor Company b.Safeway c.Barnes & Noble d.Starbucks
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A
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Which of the items below is NOT a business organization form? a.Venture entrepreneurship b.Proprietorship c.Partnership d.Corporation
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D
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4. More that 70% of businesses are organized as what type of business? a. Not-for-profit b. Corporation c. Partnership d. Sole proprietorship
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D
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5. Which of the following is TRUE in regards to a limited liability company? a. It is organized as a corporation. b. It can elect to be taxed as a partnership. c. It provides tax and liability advantages to the owners. d. All are correct.
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D
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6. Under a premium-price emphasis, a business designs products that possess __________ for which customers are willing to pay a premium price. a. unique attributes b. high costs c. competitive efficiencies d. longer warranties
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A
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7. Which of the following is NOT a characteristic of a corporation? a. Corporations are organized as a separate legal taxable entity. b. Ownership is divided into shares of stock. c. Corporations experience an ease in obtaining large amounts of resources by issuing stock. d. A corporation's resources are limited to its individual owners' resources. e. Corporations make up 20% of all businesses.
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D
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An entity that is organized according to state or federal statutes and in which ownership is divided into shares of stock is a a. proprietorship. b. corporation. c. partnership. d. governmental unit.
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B
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A low-cost emphasis strives to provide a. no-frills, standardized products and services. b. products and services that provide unique market needs. c. products and services that provide prestige and image for customers. d. products and services that compete on features other than price.
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A
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Which of the following businesses use a premium-price emphasis? a. Value City Furniture b. Abercrombie & Fitch c. Wal-Mart Supercenters d. Southwest Airlines
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B
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Motel 6 is an example of a business using which of the following? a. Low-cost emphasis b. Combination emphasis c. Differentiation strategy d. Premium-price emphasis
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A
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Which of the following are business stakeholders? a. Stockholders b. Suppliers c. Customers d. All of these
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D
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The following are examples of internal stakeholders EXCEPT: a. managers. b. creditors. c. employees. d. All of these are internal stakeholders.
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B
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Which of the following is NOT an example of a capital market stakeholder? a. Banks b. Owners c. Suppliers d. Stockholders
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C
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Due to various fraudulent business practices and accounting coverups in the early 2000s, Congress enacted the Sarbanes-Oxley Act of 2002. The act was responsible for establishing a new oversight board for public accountants called the a. Generally Accepted Accounting Practices for Public Accountants Board. b. Public Company Accounting Oversight Board. c. Congressional Accounting Oversight Board. d. None are correct.
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B
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Capital market stakeholders have an interest in the company because a. they provide incentives for the company to market their products. b. they are part of the Marketing Department that is responsible for promoting the products or services to increase the business profits. c. they help market their products to customers or find vendors to supply needed inputs. d. they provide major financing for the business.
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D
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Who has first preference to assets in case a business fails? a. Stockholders b. Long-term creditors c. Customers d. Employees
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B
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Governments have an interest in the economic performance of business because of a. tax collections. b. community involvement from the business. c. business incentives. d. all of these.
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A
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Managers are evaluated primarily on the business's a. tax collections. b. growth. c. economic performance. d. all of these.
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C
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Financing activities involve obtaining __________ to operate a business. a. products b. customers c. business incentives d. funds
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D
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When a business borrows money, it incurs a(n) a. tax. b. liability. c. receivable. d. addtional equity.
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B
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When a product is sold, this cost is often called a. cost of goods sold. b. revenue. c. products. d. retained earnings.
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A
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A note payable requires payment of the amount borrowed plus a. interest. b. cash. c. accounts payable. d. investments.
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A
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Shares of ownership are evidenced by issuing a. bonds payable. b. commercial paper. c. shares of stock. d. notes payable.
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C
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The resources a business owns are called a. assets. b. liabilities. c. earnings. d. stockholders' equity.
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B
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Which of the following is an example of an intangible asset? a. Patent b. Cash c. Land d. Equipment
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A
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Rights to payments from customers are a. liabilities. b. prepaid expenses. c. accounts receivable. d. accounts payable.
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C
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Which of the following is considered an asset until consumed? a. Accounts payable b. Prepaid expense c. Accounts receivable d. Stockholders' equity
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B
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__________ is the increase in assets from selling products and services. a. Revenue b. Liabilities c. Products d. Stockholders' Equity
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A
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Cash collected from sales during the normal course of business would be an example of which type of business activity? a. Operating b. Investing c. Financing d. None of these
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A
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Costs incurred in operating a business are also known as a. revenues. b. expenses. c. liabilities. d. dividends.
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B
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The role of accounting in business is best defined as a. an information system that provides reports to stakeholders about the economic activities and condition of a business. b. a method of forecasting the future profitability of a company. c. the policies, procedures, and strategies used in a business. d. transaction analysis.
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A
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Debts owed by a business are referred to as a. accounts receivable. b. equities. c. stockholders' equity. d. liabilities.
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D
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Reporting the financial condition of a business at a point in time and the changes in the financial condition of a business over a period of time are the two major objectives of a. tax accounting. b. union contracts. c. managerial accounting. d. financial accounting.
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D
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Which statement is normally prepared first? a. Income statement b. Balance sheet c. Statement of cash flows d. Retained earnings statement
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A
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A summary of revenue and expenses for a specific period of time is a(n) a. income statement. b. balance sheet. c. statement of cash flows. d. retained earnings statement.
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A
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Gilbert, Inc. had the following account balances at September 30, 2010. What is Gilbert's net income for the month of September? Accounts Payable $ 5,000 Capital Stock 10,000 Cash 14,300 Equipment 15,400 Fees Earned 54,400 Miscellaneous Expense 18,200 Rent Expense 4,150 Retained Earnings 6,550 Wages Expense 13,900 a. $32,450 b. $27,450 c. $6,550 d. $18,150
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D
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Browning, Inc. had revenues of $234,000, expenses of $175,000, and dividends of $30,000 during 2010. Which of the following statements is correct? a. Net income for 2010 totaled $29,000. b. Net income for 2010 totaled $59,000. c. Total retained earnings increased by $59,000 during 2010. d. Total retained earnings decreased by $30,000 during 2010.
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B
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A summary of changes in the earnings retained in the corporation for a specific period of time is a(n) a. income statement. b. balance sheet. c. statement of cash flows. d. retained earnings statement.
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D
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Which of the following is an appropriate representation of the accounting equation? a. Assets + liabilities = stockholders' equity b. Assets = liabilities + stockholders' equity c. Assets = liabilities d. Assets = liabilities + retained earnings
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B
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A summary of the cash receipts and cash payments for a specific period of time is a(n) a. income statement. b. balance sheet. c. statement of cash flows. d. retained earnings statement
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C
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The portion of a corporation's net income retained in the business is called a. income statement. b. balance sheet. c. statement of cash flows. d. retained earnings.
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D
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The debt created by a business when it makes a purchase on account is referred to as an a. account payable. b. account receivable. c. asset. d. expense payable.
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D
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If there was no beginning retained earnings, net income of $20,000, and ending retained earnings of $6,000, how much were dividends? a. $10,000 b. $4,000 c. $6,000 d. $14,000
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D
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During 2010, Smith Corporation had an increase in total assets of $70,000 and an increase in total liabilities of $90,000. Assuming that capital stock increased by $5,000 and no dividends were paid, calculate Smith's net income or net loss for 2010. a. Net loss of $15,000 b. Net loss of $20,000 c. Net loss of $25,000 d. Net income of $15,000
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C
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The "rules" of accounting are called a. income tax regulations. b.SEC regulations. c. Internet rules. d. Generally Accepted Accounting Principles.
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D
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Which principle determines the amount initially entered into the records for purchases? a. Cost principle b. Going concern concept c. Business entity concept d. Objectivity concept
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A
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Recording revenue when a sale is made most directly relates to which concept? a. Going concern concept b. Periodicity concept c. Matching concept d. Adequate disclosure concept
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C
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Expressing financial data as if a business will continue operating for an indefinite period time refers to which concept? a. Business entity concept b. Going concern concept c. Objectivity concept d. Adequate disclosure concept
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B
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The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a month or year, is called a(n) a. prior period statement. b. statement of retained earnings. c. income statement. d. balance sheet.
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C
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Including all relevant data a reader needs to understand the financial condition and performance of a business refers to which concept? a. Adequate disclosure concept b. Going concern concept c. Objectivity concept d. Business entity concept
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A
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Cash investments made by the stockholders of the business are reported on the statement of cash flows in the a. financing activities section. b. investing activities section. c. operating activities section. d. supplemental statement.
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A
