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ACC 255 Chp. 1

Which is an advantage of corporations relative to partnerships and sole proprietorships?

Reduced legal liability for investors
Most common form of organization
Increased difficulty of raising funds
Harder to transfer ownership

Reduced legal liability for investors
In which forms of business organization are the owners personally liable for all the debts of the business?

Sole proprietorships and corporations
Sole proprietorships and partnerships
Partnership and corporation
All of the answer choices are correct

Sole proprietorships and partnerships
The sole proprietorship form of business organization

is classified as a separate legal entity.
must have at least two owners in most states.
combines the records of the business with the personal records of the owner.
generally receives favorable tax treatment relative to a corporation.

generally receives favorable tax treatment relative to a corporation.
Which forms of business organization are considered to be separate accounting entities?

Entry field with correct answer
Only corporations
Sole proprietorships and partnerships only
Sole proprietorships, corporations, and partnerships
Partnerships and corporations only

Sole proprietorships, corporations, and partnerships
Which of the following is not an external user of accounting data?

Entry field with incorrect answer
Labor unions
Customers
Economic planners
Chief Financial Officer

Chief Financial Officer
Which of the following did not result from the Sarbanes-Oxley Act?

Entry field with correct answer
Top management must now certify the accuracy of financial information.
Auditors cannot provide non-audit services to the same client.
Penalties for fraudulent activity increased.
Tax rates on corporations increased.

Tax rates on corporations increased.
Which of the following is the most appropriate definition of accounting information?

Entry field with correct answer
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

The information system that identifies, records, and communicates the economic events of an organization to interested users
The payment of dividends is an example of a(n)

Entry field with correct answer
Investing activity.
Delivery activity.
Financing activity.
Operating activity.

Financing activity.
Which of the following is an example of a financing activity?

Entry field with incorrect answer
Issuing shares of common stock
Selling goods on account
Buying delivery equipment
Buying inventory

Issuing shares of common stock
Resources owned by a business are referred to as

revenues.
assets.
stockholders’ equity.
liabilities.

assets.
What kind of classification is cost of goods sold?

Expense
Liability
Asset
Revenue

Expense
Which of the following would not appear on the income statement?

Net income
Interest expense
Dividends paid
Service revenue

Dividends paid
Which of the following would not appear on the retained earnings statement?

Entry field with incorrect answer
Service revenue
Net income
Beginning retained earnings balance
Dividends

Service revenue
Net income will result during a time period when

Entry field with correct answer
revenues exceed expenses.
expenses exceed revenues.
assets exceed liabilities.
assets exceed revenues.

revenues exceed expenses.
The financial statements for Harold Corporation contained the following information:

Accounts receivable $ 5,000
Sales revenue 75,000
Cash 15,000
Salaries and wages expense 20,000
Rent expense 10,000

How much was Harold’s net income?

Entry field with correct answer
$15,000
$65,000
$45,000
$60,000

$45,000
Saira’s Maid Service began the year with total assets of $120,000 and stockholders’ equity of $40,000. During the year the company earned $90,000 in net income and paid $20,000 in dividends. Total assets at the end of the year were $215,000. How much was stockholders’ equity at the end of the year?

Entry field with correct answer
$150,000
$130,000
$110,000
$135,000

$110,000
Which statement presents information as of a specific point in time?

Entry field with incorrect answer
Balance sheet
Statement of cash flows
Retained earnings statement
Income statement

Balance sheet
Which financial statement reports assets, liabilities, and stockholders’ equity?

Retained earnings statement.
Statement of cash flows.
Balance sheet.
Income statement.

Balance sheet.
The ending retained earnings balance appears on

Both the retained earnings statement and the balance sheet.
The income statement and the retained earnings statement.
The retained earnings statement only.
The balance sheet only.

Both the retained earnings statement and the balance sheet.
If total liabilities decreased by $15,000 and stockholders’ equity increased by $5,000 during a period of time, then total assets must change by what amount and direction during that same period?

$10,000 increase
$20,000 increase
$10,000 decrease
$15,000 decrease

$10,000 decrease
Stockholders’ equity represents

claims of creditors.
the difference between revenues and expenses.
claims of owners.
economics resouces to be used in the future.

claims of owners.
As of December 31, 2014, Stoneland Corporation has assets of $3,500 and stockholders’ equity of $2,000. How much are the liabilities for Stoneland Corporation as of December 31, 2014?

$1,500
$2,000
$1,000
$2,500

$1,500
The segment of a corporation’s annual report that describes the corporation’s accounting methods is the

income statement.
management discussion and analysis.
notes to the financial statements.
auditor’s report.

notes to the financial statements.
The segment of the annual report that presents an opinion regarding the fairness of the presentation of the financial position and results of operations is/are the

r
auditor’s opinion.
income statement.
balance sheet.
financial statements.

auditor’s opinion.
Which section of the annual report presents highlights of favorable or unfavorable trends and identifies significant events and uncertainties affecting a company’s ability to pay near-term obligations, and a company’s ability to fund operations and expansion?

Financial statements
Management discussion and analysis
Notes to the financial statements
Auditor’s report

Management discussion and analysis

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