accounting chapter 1

Which of the following is an example of equity financing

A company raised $1 million by selling stocks to investors

Which of the following statements about the proprietorship form of business is true?

It generally receives favorable tax treatment relative to a corporation.

Which of the following is true of a partnership?

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

Which of the following is true of a corporation?

It is owned by its stockholders.

Which of the following illustrates a way to use excess cash in investing activities

Purchase securities of other corporations

Which of the following statements is true regarding the Sarbanes-Oxley Act (SOX)?

The act has resulted in increased penalties for financial fraud by top management. The act calls for increased oversight responsibilities for boards of directors. The act is meant to decrease the likelihood of unethical corporate behavior.

Which of the following is NOT considered an asset of a company

dividends

Corporate stockholders generally ___ pay high taxes and have no personal liability.

do

The activities in the accounting process focus on identifying, recording, and communicating

economics

Salaries and Wages Expense is

expense

cost of advertising

expense

rent expense is a

expense

supplies expense is a

expense

Customers who want to know if a company will stay in business in the long term and honor warranties are considered ________ users of accounting information

external

Cash paid to stockholders

financing

Cash received from issuing stock

financing

You have been tasked with looking at the company's financial statements and determining what percentage of raises the employees should receive this year. Based on this, which department do you most likely work in?

human resources

Which internal user of accounting information would be most interested in information about pay raises that the company can offer its employees this year?

human resources director

Accounting is the information system that ________ the economic events of an organization so that users can make decisions

identifies, records, and communicates

When a company's revenues exceed their expenses, they record a net

income

Sales Revenue

income statement

cost of goods sold

income statement

income tax expense

income statement

interest expense

income statement

A local design company has been operating as a sole proprietorship. The business is growing and now the owner wants to incorporate. Which of the following would be considered disadvantages of forming a corporation

increased taxes difficulty in establishing a corporation accountability to stockholders

"Should we add capacity to our manufacturing plant to increase the volume of production?" would best represent a question a(n) ______ user of accounting information would ask

internal

should any retail locations be closed

internal

Forecasts of cash needs for the next year and financial comparisons of operating activities are examples of

internal reports that accounting provides to internal users

trying to determine whether the company complied with tax laws

internal revenue service

You are using a company's financial information to determine how much to increase the company's employees' wages and salaries. You are an example of a(n)

internal user

The Wine Cellar grows grapes and turns them into wine. They then store the wine until a customer purchases it. The Wine Cellar tracks the amount of wine they have in storage and records it as

inventory

trying to determine whether the company's net income will result in a stock price increase

investors in common stock

Which of the following external users of a company's financial documents will be MOST concerned about the wages the employees receive?

labor union

Bonds Payable

liability

If a company owes money to a bank, an investor, or another company, they will need to record

liability

accounts payable is a

liability

amounts owed to suppliers

liability

mortage payable is

liability

Which of the following would be most likely to need information about forecasts of cash needs for the next year

management

trying to determine whether an advertising proposal will be cost-effective

marketing managers

According to step 3 of solving ethical dilemmas, ethical dilemmas

may have more than one right solution

The partnership form of business organization is

often formed by individuals who bring different skills and resources to the business

Cash received from customers

operating

cash paid to suppliers

operating

A business that is owned jointly by two or more individuals but does not issue stock

partnership

Shared control, tax advantages, increased skills and resources

partnership

A company must have sufficient cash on hand to cover payments to creditors before it can

pay dividends to stockholders

amount earned from selling a product

revenue

sales revenue is a

revenue

service revenue is

revenue

A company that performs car maintenance for customers would record what type of revenue

service revenue

Which of the following are NOT characteristics of a corporation? Select all that apply

simple to set up and maintains control with founder best for retail and service-type businesses, controlled by founder shared control, tax advantages, increased skills and resources

Simple to set up and maintains control with owner

sole proprietorship

A party that invests in common stock

stockholder

What accounting information do creditors primarily look for when they read financial statements?

the credit worthiness of a company

A regulatory agency is an external user that needs to know if a company is operating within prescribed rules.

true

Which of the following questions would a creditor most likely ask

Will the company be able to pay its debts when they come due

Which of the following is a definition of a partnership?

a business owned by two or more persons who have specific duties and responsibilities

Which of the following is an example of an investing activity

a clothing manufacturing company purchasing a sewing machine

Obligations to suppliers of goods

accounts payable

Amounts due from customers

accounts receivable

Which of the following is required in order for a company to participate in investing activities

adequate amounts of cash

Accounts Receivable is a

asset

inventory is a

asset

land purchased

asset

equipment is a

assets

An expression about whether financial statements conform with generally accepted accounting principles

auditor

Accounts Receivable

balance sheet

accounts payable

balance sheet

common stock

balance sheet

equiptment

balance sheet

inventory

balance sheet

retained earnings

balance sheet

Accounting provides ________ to internal users

both forecasts of cash needs for the next year and financial comparisons

trying to determine whether the company should employ debt or equity financing

chief financial officer

Issuance of ownership shares

common stock

The portion of stockholders' equity that results from receiving cash from investors

common stock

A company publishes financial statements for various parties to review and reference. This is an example of which accounting process activity

communication

Dieter is meeting with company executives and forwards each of them a copy of the financial statements in preparation of their meeting. Dieter is engaged in the step of the accounting process

communication

A business that is organized as a separate legal entity owned by shareholders is a

corporation

A business that raises money by issuing shares of stock

corporation

Easier to transfer ownership and raise funds, no personal liability

corporation

Which of the following forms of business ownership is responsible for the majority of revenue produced in the United States?

corporation

A party to whom a business owes money

creditor

Jane gave money to a company with the specification that she would be repaid at the end of three months. Based on this information, Jane is an example of a(n)

creditor

trying to determine whether the company can pay its obligations

creditors

If a company raises $100,000 by selling bonds to investors, they are involved in

debt financing

Which of the following is NOT a step in analyzing ethics cases in financial reporting

Contact law enforcement regarding any violations of corporate ethics codes

What has resulted from the Sarbanes-Oxley Act (SOX)?

Management must certify the accuracy of financial information Penalties for fraudulent activities are much more severe