Accounting Final Exam

Which of the following entities would have a paid-in capital in excess of par (or stated) value account in the equity section of the balance sheet? A) A corporation. B) A municipality. C) A sole proprietorship. D) A partnership.

A. A corporation.

The term "double taxation" refers to which of the following? A) Corporations must pay income taxes on their net income, and their stockholders must pay income taxes on their dividends. B) In a partnership, both partners are required to claim their share of net income on their tax returns. C) A sole proprietorship must pay income taxes on its net income and the owner is also required to pay income taxes on withdrawals. D) A sole proprietorship must pay income taxes to both the state government and the federal government.

A. Corporations must pay income taxes on their net income, and their stockholders must pay income taxes on their dividends.

Which of the following would be classified as a tangible asset? A. Land B. Goodwill C. Copyright D. Trademark

A. Land

Monroe Minerals Company purchased a copper mine for $120,000,000. The mine was expected to produce 50,000 tons of copper over its useful life. During 2016, the company extracted 6,000 tons of copper. The copper was sold for $4,500 per ton. Assume that the company incurred $8,040,000 in operating expenses during 2016. Based on this information, how much net income would Monroe report in 2016? A. $12,600,000. B. $4,560,000. C. $6,360,000. D. $14,400,000

B. $4,560,000

On April 1, 2016, Fossil Energy Company purchased an oil producing well at a cash cost of $12,000,000. It is estimated that the oil well contains 600,000 barrels of oil, of which only 500,000 can be profitably extracted. By December 31, 2016, 25,000 barrels of oil were produced and sold. The amount of depletion expense for 2016 on this well would be: A. $800,000. B. $600,000. C. $480,000. D. $500,000.

B. $600,000

Which of the following entities would report income tax expense on its income statement? A) A sole proprietorship. B) A corporation. C) A partnership. D) All of these answer choices are correct.

B. A corporation.

Which of the following statements best describes the term "par value?" A) The number of shares currently in the hands of stockholders. B) The amount that must be paid to purchase a share of stock. C) Determined by dividing total stockholder's equity by the number of shares of stock. D) An amount used in determining a corporation's legal capital.

B. The amount that must be paid to purchase a share of stock

Which of the following is not normally a preference given to the holders of preferred stock? A) The right to receive a specified amount of dividends prior any being paid to common stockholders. B) The right to vote before the common stockholders at the corporation's annual meeting. C) The right to receive preference over common stockholders as to the distribution of assets during a liquidation process. D) All of these are preferences given to preferred stock.

B. The right to vote before the common stockholders at the corporation's annual meeting

Which of the following would be classified as a long-term operational asset? A. Notes receivable B. Trademark C. Inventory D. Accounts receivable

B. Trademark

Which of the following would most likely not be expensed using the straight line method? A. A copyright B. A building C. A timber reserve D. A patent

C. A timber reserve

Which form of business organization is established as a legal entity separate from its owners? A) Sole proprietorship B) Partnership C) Corporation D) None of these

C. Corporation

Which of the following intangible assets does not convey a specific legal right or privilege? A. Copyrights B. Franchises C. Goodwill D. Trademarks

C. Goodwill

Which of the following is not classified as property, plant, and equipment? A. Computers B. Buildings C. Land D. Furniture

C. Land

Which of the following statements about types of business entities is true? A) For accounting purposes a sole proprietorship is not a separate entity from its owner. B) Ownership in a partnership is represented by having shares of capital stock. C) One advantage of a corporation is ability to raise capital. D) Sole proprietorships are subject to double taxation.

C. One advantage of a corporation is ability to raise capital.

Which of the following is a disadvantage of a sole proprietorship? A) Entrenched management. B) Double taxation. C) Unlimited liability. D) Excessive regulation.

C. Unlimited liability

Blair Scott started a sole proprietorship by depositing $75,000 cash in a business checking account. During the accounting period the business borrowed $30,000 from a bank, earned $18,000 of net income, and Scott withdrew $12,000 cash from the business. Based on this information, at the end of the accounting period Scott's capital account contained a balance of: A) $93,000. B) $111,000. C) $72,000. D) $81,000.

D. $81,000

The term "Retained Earnings" is best explained by which of the following statements? A) Money set aside for the redemption of bonds. B) The difference between total revenue and total expenses in an accounting period. C) Cash retained in a separate bank account designated for emergency uses. D) A measure of capital generated through operating activities.

D. A measure of capital generated through operating activities.

Which of the following would not be classified as a tangible long-term asset? A. Delivery truck B. Timber reserve C. Land D. Copyright

D. Copyright

Which of the following is not considered an advantage of the corporate form of business organization? A) Ability to raise capital. B) Continuity of existence. C) Ease of transferability of ownership. D) Lack of government regulation.

D. Lack of government regulation.

Which of the following terms is used to identify the process of expense recognition for property, plant, and equipment? A. Amortization B. Valuation C. Depletion D. None of the above

D. None of the above (depreciation)

On January 2, Year 1, Torres Corporation issued 20,000 shares of $10 par-value common stock for $11 per share. Which of the following statements is true? A) The common stock account will increase by $220,000. B) The cash account will increase by $200,000. C) Total equity will increase by $200,000. D) The paid-in capital in excess of par value account will increase by $20,000

D. The paid-in capital in excess of par value account will increase by $20,000

True or false: A sole proprietorship is an accounting entity separate from its owners.

False.

True or false: Double taxation refers to the fact that both a partnership and its partners must pay income tax on the earnings of their partnership.

False.

True or false: Limited liability is a benefit to both corporations and partnerships, but not to sole proprietorships.

False.

Fred and Barney started a partnership. Fred invested $20,000 in the business and Barney invested $32,000. The partnership agreement stipulated that profits would be divided as follows: Each partner would receive a 15% return on invested capital with the remaining income being distributed equally between the two partners. Assuming that the partnership earned $38,000 during an accounting period, the amount of income assigned to the two partners would be:

$18,100 for Fred and $19,900 for Barney

Ogilvie Corp. issued 12,000 shares of no-par stock for $40 per share. Ogilvie was authorized to issue 35,000 shares. What effect will this event have on the company's financial statements? A) Increase assets by $1,400,000, increase equity by $1,400,000. B) Increase assets by $480,000, increase equity by $480,000. C) Increase cash flow from investing activities by $480,000. D) None of these answer choices are correct.

B. Increase assets by $480,000, increase equity by $480,000

Which of the following terms designates the maximum number of shares of stock that a corporation may issue? A) Number of shares issued B) Number of shares authorized C) Par value D) Number of shares outstanding

B. Number of shares authorized

The recognition of depletion expense: A. decreases assets and equity and decreases cash flow from investing expenses under the direct approach B. decreases cash flow from operating activities, and does not affect the amount of total assets. C. increases assets, equity, and cash flow from operating activities. D. decreases assets and equity, and does not affect cash flow.

D. decreases assets and equity, and does not affect cash flow

True or false: Sole proprietorships are, generally, subject to fewer governmental regulations than corporations.

True.

True or false: Unlike a partnership, a corporation is not terminated when a major stockholder withdraws his/her investment.

True.