Test Answers on Chapter 1 Test

question

Which of the following would not be considered an external user of accounting data for the Julian Company? Internal Revenue Service Agent, Management Creditors Customers
answer

Management
question

The partnership form of business organization enjoys an unlimited life. is a common form of organization for service-type businesses. is a separate legal entity. has limited liability.
answer

is a common form of organization for service-type businesses.
question

Which of the following groups uses accounting information to determine whether the company can pay its obligations? Investors in common stock Marketing managers Chief Financial Officer Creditors
answer

Creditors
question

The management discussion and analysis (MD&A) section of the annual report covers all of the following aspects except: The certification criteria of the company’s auditors. The ability of the company to pay near-term obligations. The results of the company operations. The company’s ability to fund operations and expansion.
answer

The certification criteria of the company’s auditors.
question

Liabilities: possess service potential. are things of value owned by a business. are future economic benefits. are debts and obligations.
answer

are debts and obligations.
question

If total liabilities increased by $45,000 and stockholders’ equity increased by $15,000 during a period of time, then total assets must change by what amount and direction during that same period? $75,000 increase $60,000 increase $90,000 increase $60,000 decrease
answer

$60,000 increase
question

Benedict Company compiled the following financial information as of December 31, 2012: Revenues $280,000 Common stock 60,000 Equipment 80,000 Expenses 250,000 Cash 70,000 Dividends 20,000 Supplies 10,000 Accounts payable 40,000 Accounts receivable 30,000 Retained earnings, 1/1/12 150,000 Benedict’s retained earnings on December 31, 2012 are:
answer

$160,000
question

The best definition of assets is the: Owners’ investment in the business. resources belonging to a company have future benefit to the company. cash owned by the company. collections of resources belonging to the company and the claims on these resources.
answer

resources belonging to a company have future benefit to the company.

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