accounting exam 1
A report prepared by management that presents financial information.
Annual report
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.
Ownership is limited to one person.
sole proprietorship
Simple to set up and maintains control with owner.
sole proprietorship
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.
Distributions of cash from a corporation to its stockholders.
Dividends
A section of the annual report that presents management's views.
Managment dissucsion and analyvis
Which of the following is an advantage of corporations relative to partnerships and sole proprietorships?
Reduced legal liability for investors.
Which is not a required part of an annual report of a publicly traded company?
Statement of cash flows. Notes to the financial statements. Management discussion and analysis. All of these are required.
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?
Future economic benefits.
assets
Common stock.
balance sheet
Inventory
balance sheet
Retained earnings.
balance sheet
equipment
balance sheet
Accounts receivable.
balance sheet (assets)
A separate legal entity under state laws.
coporation
Easier to transfer ownership and raise funds, no personal liability.
coporation
Consumed assets or services.
expenses
Cash received from issuing new common stock.
financing activities
Cash paid to stockholders (dividends).
financing activity
Cost of goods sold.
income statement
Income tax expense.
income statement
Interest expense.
income statement
Sales revenue.
income statement
Officers and others who manage the business.
internal users
Cash paid to purchase a new office building.
investing activities
Involves acquiring the resources necessary to run the business.
investing activities
A business organized as a corporation
is owned by its stockholders.
An advantage of the corporate form of business is that
its ownership is easily transferable via the sale of shares of stock.
Creditor claims against the assets of the business.
liabilites
Cash received from customers.
operating activities
Cash paid to suppliers.
operating activity
Shared control, tax advantages, increased skills and resources.
partnership
A small neighborhood barber shop that is operated by its owner would likely be organized as a
proprietorship.
