ACCT CH.1

Which of the following is NOT an advantage of the corporate form of business organization? (A) Favorable tax treatment (B) No personal liability (C) Easy to raise funds (D) Easy to transfer ownership

(A) Favorable tax treatment

Which of the following groups uses accounting information to determine whether the company's net income will result in a stock price increase? (A) Investors in common stock (B) Marketing managers (C) Creditors (D) Chief Financial Officer

(A) Investors in common stock

Which of the following is an advantage of corporations relative to partnerships and sole proprietorships? (A) Reduced legal liability for investors (B) Lower taxes (C) Most common form of organization (D) Harder to transfer ownership

(A) Reduced legal liability for investors

Bonita Industries began the year with a retained earnings of $942000. During the year, the company issued $1309000 of common stock, recorded expenses of $3633000, and paid dividends of $24300. If Bonita ending retained earnings was $100200, what was the company's revenue for the year? (A) $3693000 (B) $393600 (C) $500200 (D) $50196000

(B) $393600

In a study session, a classmate makes this statement "Dividends are listed as expenses on the income statement." What is your best response to this statement? (A) I've been struggling with that concept and I feel that dividends should be shown on the balance sheet as assets. (B) You are right. Revenues and expenses are shown on the income statement. Dividends are a cost of generating revenues and that makes them an expense. Why else would a corporation pay dividends? (B) Dividends represent a portion of corporate profits that are paid to the shareholders. They belong on the retained earnings statement. (D) Dividends are deducted from retained earnings on the balance sheet

(B) Dividends represent a portion of corporate profits that are paid to the shareholders. They belong on the retained earnings statement.

Why are financial statement users interested in the statement of cash flows? (A) It is the easiest financial statement to evaluate. (B) It provides information about an important company resource. (C) It is the first statement that is presented to users. (D) It helps users decide whether assets such as office equipment should be replaced.

(B) It provides information about an important company resource.

Which of the following clarifies information presented in the financial statements, as well as expanding upon it where additional detail is needed? (A) Mangement discussion and analysis section (B) Notes to the financial statements (C) President's state of the company report (D) Auditor's report

(B) Notes to the financial statements

Liabilities: (A) Are things of value owned by a business (B) Are future economic benefits (C) Are debts and obligations (D) Possess service potential

(C) Are debts and obligations

Which of the following activities involves collecting the necessary funds to support the business? (A) Investing (B) Delivering (C) Financing (D) Operating

(C) Financing

Debts and obligations of a business are referred to as: (A) Equities (B) Expenses (C) Liabilities (D) Assets

(C) Liabilities

Stakeholders' Equity: (A) Is usually equal to cash on hand (B) Is shown on the income statement (C) Is equal to liabilities and retain earnings (D) Includes retained earnings and common stock

(D) Includes retained earnings and common stock

An income statement: (A) Reports assets, liabilities, and stockholders' equity at a specific time (B) Reports the changes in assets, liabilities, and stockholders' equity over a period of time (C) Summarizes the changes in retained earnings for a specific period of time (D) Presents the revenues and expenses for a specific period of time

(D) Presents the revenues and expenses for a specific period of time

(A)

a

Buying and selling products are example of: (A) Operating activities (B) Investing activities (C) Financing activities (D) Delivering activities

(A) Operating activities

Net income will result during a time period when: (A) Expenses exceed revenues (B) Revenues exceed expenses (C) Assets exceed liabilities (D) Assets exceed revenues

(B) Revenues exceed expenses

Which of the following groups uses accounting information primarily to insure the entity is operating within prescribed rules? (A) Management (B) Labor Unions (C) Taxing authorities (D) Regulatory agencies

(D) Regulatory agencies