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Chapter 1 Test

Which of the following would not be considered an external user of accounting data for the Julian Company?

Internal Revenue Service Agent,

Management

Creditors

Customers

Management
The partnership form of business organization

enjoys an unlimited life.

is a common form of organization for service-type businesses.

is a separate legal entity.

has limited liability.

is a common form of organization for service-type businesses.
Which of the following groups uses accounting information to determine whether the company can pay its obligations?
Investors in common stock

Marketing managers

Chief Financial Officer

Creditors

Creditors
The management discussion and analysis (MD&A) section of the annual report covers all of the following aspects except:

The certification criteria of the company’s auditors.

The ability of the company to pay near-term obligations.

The results of the company operations.

The company’s ability to fund operations and expansion.

The certification criteria of the company’s auditors.
Liabilities:

possess service potential.

are things of value owned by a business.

are future economic benefits.

are debts and obligations.

are debts and obligations.
If total liabilities increased by $45,000 and stockholders’ equity increased by $15,000 during a period of time, then total assets must change by what amount and direction during that same period?

$75,000 increase

$60,000 increase

$90,000 increase

$60,000 decrease

$60,000 increase
Benedict Company compiled the following financial information as of December 31, 2012:

Revenues $280,000
Common stock 60,000
Equipment 80,000
Expenses 250,000
Cash 70,000
Dividends 20,000
Supplies 10,000
Accounts payable 40,000
Accounts receivable 30,000
Retained earnings, 1/1/12 150,000

Benedict’s retained earnings on December 31, 2012 are:

$160,000
The best definition of assets is the:

Owners’ investment in the business.

resources belonging to a company have future benefit to the company.

cash owned by the company.

collections of resources belonging to the company and the claims on these resources.

resources belonging to a company have future benefit to the company.

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