Chapter 1 Homework
Which of the following is a user of accounting information with an indirect financial interest in a business? Investor A financial adviser Creditor Management
A financial adviser
Which of the following is not a liability? Unearned Service Revenue Interest Payable Accounts Receivable Accounts Payable
Accounts Receivable
Which of the following is not one of the three primary business activities? Operating Advertising Financing Investing
Advertising
To which of the following questions will internal users want answers? What selling price for our product will maximize the company's net income? Which product line is most profitable? Is cash sufficient to pay dividends to stockholders? All of the answer choices are correct.
All of the answer choices are correct.
Which type of corporate information is readily available to investors? Forecasts of cash needs for the upcoming year. Amount of net income retained in the business. Marketing strategies for a product that will be introduced in eighteen months. Financial comparison of operating alternatives.
Amount of net income retained in the business.
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. Only Jill is personally liable for the debt of the business, since Jack has been working and she has not. Only Jack is personally liable for the debt, since he has been the managing partner during that time. Neither Jack nor Jill is personally liable for the business debt, since the partnership is a separate legal entity.
Both Jack and Jill are personally liable for the business debt.
Which of the following are internal reports that accounting provides to internal users? Both forecasts of cash needs and financial comparisons are internal reports. Financial comparisons of operating activity alternatives. Neither forecasts of cash needs or financial comparisons is an internal report. Forecasts of cash needs for next year.
Both forecasts of cash needs and financial comparisons are internal reports.
Which of the following is not one of the primary types of the financing activities in the statement of cash flows? Buying equipment Borrowing money Issuing shares of stock Paying dividends
Buying equipment
Which of the following is not a step for solving an ethical dilemma? Recognizing the ethical situation and issues involved. Identifying the alternatives and weighing the impact of each alternative on various stakeholders. Identifying and analyzing the principal elements in the situation. Certifying the ethical accuracy of the financial information.
Certifying the ethical accuracy of the financial information.
Which of the following is not an external user of accounting data? Customers Economic planners Chief Financial Officer Labor unions
Chief Financial Officer
Ease of transferring ownership is a characteristic of which form of business organization?
Corporation
Which of the following is a primary user of accounting information with a direct financial interest in the business? Regulatory agency Labor union Creditor Taxing authority
Creditor
Which of the following would not be considered an internal user of accounting data for a company? The controller of a company Salesperson of a company Creditor of a company The president of a company
Creditor of a company
Which of the following external groups uses accounting information to determine whether the company can pay its obligations? Investors in common stock Chief Financial Officer Marketing managers Creditors
Creditors
Which is not one of the three forms of business organization? Partnership Creditorship Corporation Sole proprietorship
Creditorship
Which is not one of the three forms of business organization? Sole proprietorship Creditorship Corporation Partnership
Creditorship
Which of the following is not a principal type of business activity? Delivering Financing Operating Investing
Delivering
A corporation has which of the following set of characteristics? Harder to raise funds and gives owner control. Shared control, tax advantages, increased skills and resources. Easier to transfer ownership and raise funds, no personal liability. Simple to set up and maintains control with founder.
Easier to transfer ownership and raise funds, no personal liability.
What kind of classification is cost of goods sold?
Expense
Which of the following is not an advantage of the corporate form of business organization? Easy to raise funds Favorable tax treatment Easy to transfer ownership No personal liability
Favorable tax treatment
Which of the following activities involves collecting the necessary funds to support the business? Investing Operating Financing Delivering
Financing
Which type of corporate information is not available to investors? Dividend history Beginning cash balance Forecast of cash needs for the upcoming year Cash provided by investing activities
Forecast of cash needs for the upcoming year
Which activities involve acquiring the resources to run the business?
Investing
In what section of the statement of cash flows would the purchase of office equipment for $10,000 cash appear? Operating activities Investing activities Financing activities Selling activities
Investing activities
On. Jan. 10, Novis Company purchased manufacturing equipment for $80,000 cash. What kind of activity is this?
Investing activity
Which of the following is an asset? Investments Common stock Mortgage payable Retained earnings
Investments
Which of the following is not one of the three forms of business organization? Partnerships Investors Proprietorships Corporations
Investors
Which of the following groups uses accounting information to determine whether the company's net income will result in a stock price increase? Chief Financial Officer Marketing managers Creditors Investors in common stock
Investors in common stock
Which of the following is an example of a financing activity? Issuing shares of common stock Buying inventory Buying delivery equipment Selling goods on account
Issuing shares of common stock
Which of the following would not be considered an external user of accounting data for the Julian Company? Customers Creditors Management Internal Revenue Service agent
Management
Which of the following is the best definition of an internal user of accounting information? Creditors like banks that use accounting information to evaluate the risk of lending money. Investors who use accounting information to decide whether to buy or sell stock. Labor unions who use accounting information to examine the ability of the company to pay increased wages and benefits. Managers who use accounting information to plan, organize, and run a business.
Managers who use accounting information to plan, organize, and run a business.
Which of the following groups uses accounting information to determine whether a marketing proposal will be cost effective? Chief Financial Officer Creditors Marketing managers Investors in common stock
Marketing managers
Which activities involve putting the resources of the business into action to generate a profit? Delivering Operating Investing Financing
Operating
Which of the following would not be considered an internal user of accounting data for the Xanadu Company? Merchandise inventory clerk President of the company Production manager President of the employees' labor union
President of the employees' labor union
Which is an advantage of corporations relative to partnerships and sole proprietorships? Harder to transfer ownership Reduced legal liability for investors Increased difficulty of raising funds Most common form of organization
Reduced legal liability for investors
Which is an advantage of corporations relative to partnerships and sole proprietorships? Increased difficulty of raising funds Most common form of organization Reduced legal liability for investors Harder to transfer ownership
Reduced legal liability for investors
Which of the following is an advantage of corporations relative to partnerships and sole proprietorships? Harder to transfer ownership Reduced legal liability for investors Lower taxes Most common form of organization
Reduced legal liability for investors
Which of the following groups uses accounting information primarily to insure the entity is operating within prescribed rules? Labor Unions Taxing authorities Regulatory agencies Management
Regulatory agencies
Which of the following statements concerning users of accounting information is incorrect? Taxing authorities are considered external users. Present creditors are considered external users. Management is considered an internal user. Regulatory authorities are considered internal users.
Regulatory authorities are considered internal users.
Which statement about users of accounting information is incorrect? Present creditors are considered external users. Management is considered an internal user. Taxing authorities are considered external users. Regulatory authorities are considered internal users.
Regulatory authorities are considered internal users.
In which forms of business organization are the owners personally liable for all the debts of the business?
Sole proprietorships and partnerships
Which forms of business organization are considered to be separate accounting entities?
Sole proprietorships, corporations, and partnerships
Which of the following did not result from the Sarbanes-Oxley Act? Tax rates on corporations increased. Penalties for fraudulent activity increased. Top management must now certify the accuracy of financial information. Increased independence of the outside auditors.
Tax rates on corporations increased.
Which of the following did not result from the Sarbanes-Oxley Act? Tax rates on corporations increased. Top management must now certify the accuracy of financial information. Increased independence of the outside auditors. Penalties for fraudulent activity increased.
Tax rates on corporations increased.
Which of the following statements is not true regarding the Sarbanes-Oxley Act (SOX)? The Act has resulted in increased penalties for financial fraud by top management. The Act is meant to decrease the likelihood of unethical corporate behavior. The Act calls for increased oversight responsibilities for boards of directors. The Act calls for decreased independence of outside auditors reviewing corporate financial statements.
The Act calls for decreased independence of outside auditors reviewing corporate financial statements.
Which of the following is the most appropriate and modern definition of accounting? Electronic collection, organization, and communication of vast amounts of information. The interconnected network of subsystems necessary to operate a business. The information system that identifies, records, and communicates the economic events of an organization to interested users. A means of collecting information.
The information system that identifies, records, and communicates the economic events of an organization to interested users.
Which of the following is the most appropriate definition of accounting? The information system that identifies, records, and communicates the economic events of an organization to interested users. Electronic collection and organization of vast amounts of financial information. The interconnected network of subsystems necessary to operate a business. A means of collecting information.
The information system that identifies, records, and communicates the economic events of an organization to interested users.
Which of the following is the most appropriate definition of accounting? The information system that identifies, records, and communicates the economic events of an organization to interested users. A means of collecting information. The interconnected network of subsystems necessary to operate a business. Electronic collection and organization of vast amounts of financial information.
The information system that identifies, records, and communicates the economic events of an organization to interested users.
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? Ability to raise capital for expansion. The prestige of operating as a corporation. Desire to limit the owner's personal liability. The ease in transferring shares of the corporation's stock.
The prestige of operating as a corporation.
Which of the following is required as a result of SOX? Companies that go bankrupt must repay shareholders for loss investments. All shareholders now have an oversight role of the company's financial activities. Public companies must present audited financial statements. Top management must certify the financial statements for their company.
Top management must certify the financial statements for their company.
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? Should any product lines be eliminated? What price for our product will maximize the company income? Which product line is most profitable?
What average pay raise is affordable for employees this year?
External users want answers to all of the following questions except Is the company earning satisfactory income? Will the company be able to pay its debts as they come due? Will the company be able to afford employee pay raises this year? How does the company compare in profitability with competitors?
Will the company be able to afford employee pay raises this year?
The liability created by a business when it purchases coffee beans and coffee cups on credit from suppliers is termed a(n)
account payable.
The right to receive money in the future is called a(n)
account receivable.
A commercial real estate broker may be interested in... cash flow statements of a real estate property. future earning potential of a real estate property. reserves for long term improvements set aside by the current management. all of these.
all of these
The cost of assets consumed or services used is also known as
an expense.
After the enactment of SOX, perpetrators of fraudulent accounting practices
are punished severely with possible imprisonment.
Resources owned by a business are referred to as
assets.
Which of the following may not have a need to understand accounting? university administrators. corporate marketing executives. baseball players. bank executives.
baseball players
Debt securities sold to investors that must be repaid at a particular date some years in the future are called
bonds payable.
A business organized as a separate legal entity is a
corporation.
Distributions to stockholders are called
dividends.
Borrowing money is an example of a(n)
financing activity
Issuing shares of stock in exchange for cash is an example of a(n)
financing activity.
The payment of dividends is an example of a(n)
financing activity.
The common characteristic possessed by all assets is
future economic benefit.
The proprietorship form of business organization
generally receives favorable tax treatment relative to a corporation.
The sole proprietorship form of business organization
generally receives favorable tax treatment relative to a corporation.
Sharing accounting information with employees may
help the latter make better decisions
The statement of cash flows would disclose the payment of a dividend
in the financing activities section.
Buying assets needed to operate a business is an example of a(n)
investing activity.
The partnership form of business organization
is a common form of organization for service-type businesses.
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.
Debts and obligations of a business are referred to as
liabilities.
The group of users of accounting information charged with achieving the goals of the business is its
managers.
Buying and selling products are examples of
operating activities.
Paying interest expense and receiving interest revenue are examples of
operating activities.
In terms of the principal types of business activities, paying salaries expense is an example of an
operating activity.
A small neighborhood barber shop that is operated by its owner would likely be organized as a
proprietorship.
Most business enterprises in the United States are
proprietorships and partnerships.
The best definition of assets is the cash owned by the company. owners' investment in the business. collections of resources belonging to the company and the claims on these resources. resources belonging to a company that have future benefit to the company.
resources belonging to a company that have future benefit to the company.
Allowing employees to own stock in their company
results in alignment of interests of employees with the owners' interests
Allowing employees to own stock in their company
results in alignment of interests of employees with the owners' interests.
If a senior executive asks his or her subordinate to enagage in wilful accounting deception, the employee
should not follow their superior's instructions and if possible bring the matter to the attention of the legal counsel.
External users of accounting information, like the Internal Revenue Service, are most commonly known as
taxing authorities.
Expenses are incurred
to generate revenues.
All of the following are advantages for choosing a proprietorship for a business except transfer of ownership is easily achieved through stock sales. a proprietorship gives the owner control of the business. a proprietorship is a simple form of business to set up. proprietorship receive more favorable tax treatment.
transfer of ownership is easily achieved through stock sales.
