Question 1

A creditor who has loaned money to a business has a claim to some of the assets of the business until the debt is paid.

Accepted Answer

A) True 
 B)False

Question 2

Regarding the monetary unit assumption, which of the following statements is correct?

Accepted Answer

A)  This assumption requires that the items on the financial statements be measured at their current market value. 
B)  Accountants assume that the dollar's purchasing power is stable. 
C)  The value of a dollar does not change over time. 
D)  During periods of inflation, a dollar will purchase more. 
A)  This assumption requires that the items on the financial statements be measured at their current market value. 
B)  Accountants assume that the dollar's purchasing power is stable. 
C)  The value of a dollar does not change over time. 
D)  During periods of inflation, a dollar will purchase more.

Question 3

Which of the following is a major reason why corporate ownership is popular in the United States?

Accepted Answer

A)  Stockholders have limited liability for the debts of the corporation. 
B)  Most corporations are small- or medium-sized. 
C)  The life of a corporation is limited by the death of the owner. 
D)  A corporation is usually managed by the owners. 
A)  Stockholders have limited liability for the debts of the corporation. 
B)  Most corporations are small- or medium-sized. 
C)  The life of a corporation is limited by the death of the owner. 
D)  A corporation is usually managed by the owners.

Question 4

Westwood Supply Services received $1,000 cash from a customer; the amount was owed to the business from the previous month. Which of the following accounts will decrease as a result of this transaction?

Accepted Answer

A)  Cash 
B)  Revenue 
C)  Accounts Payable 
D)  Accounts Receivable 
A)  Cash 
B)  Revenue 
C)  Accounts Payable 
D)  Accounts Receivable

Question 5

In a limited-liability company (LLC), the members are personally liable for the debts of the business.

Accepted Answer

A) True 
 B)False

Question 6

Liabilities represent creditors' claims on the business's assets.

Accepted Answer

A) True 
 B)False

Question 7

The distribution of dividends represents an increase in retained earnings.

Accepted Answer

A) True 
 B)False

Question 8

To be useful, accounting must be relevant and have faithful representation.

Accepted Answer

A) True 
 B)False

Question 9

Briefly discuss each of the following corporate characteristics.
A. Corporate taxation
B. Separate legal entity
C. No mutual agency

Accepted Answer

A. Corporate taxation - Corporations are

Question 10

The creation of a corporation begins when its incorporators obtain a charter from the state.

Accepted Answer

A) True 
 B)False

Question 11

A payable is always a liability.

Accepted Answer

A) True 
 B)False

Question 12

Certified Public Accountants are licensed professional accountants who serve the general public.

Accepted Answer

A) True 
 B)False

Question 13

The ultimate control of the corporation rests with the ________.

Accepted Answer

A)  board of directors 
B)  stockholders 
C)  chairperson of Board of Directors 
D)  chief operating officer 
A)  board of directors 
B)  stockholders 
C)  chairperson of Board of Directors 
D)  chief operating officer

Question 14

Which of the following organizations requires publicly owned companies to be audited by independent accountants (CPAs)?

Accepted Answer

A)  Securities and Exchange Commission (SE
C)  
B)  Public Company Accounting Oversight Board (PCAO
B)  
C)  Financial Accounting Standards Board (FAS
B)  
D)  American Institute of Certified Public Accountants (AICP
A)  
A)  Securities and Exchange Commission (SE
C)  
B)  Public Company Accounting Oversight Board (PCAO
B)  
C)  Financial Accounting Standards Board (FAS
B)  
D)  American Institute of Certified Public Accountants (AICP
A)

Question 15

Dividends are a distribution of a corporation's earnings to stockholders.

Accepted Answer

A) True 
 B)False

Question 16

McCoy Corporation provides plumbing services. Transactions during the first year of operations are provided below. 
a. Received $12,000 cash and issued common stock to Sharon McCoy.
B. Paid $1,900 cash for equipment to be used for plumbing repairs.
C. Borrowed $10,000 from a local bank and deposited the money in the checking account.
D. Paid $400 rent for the year.
E. Purchased $500 of office supplies by cash.
F. Completed a plumbing repair project for a local lawyer and received $3,200 cash.
Calculate the amount of total liabilities at the end of the first year.

Accepted Answer

A)  $10,000 
B)  $12,000 
C)  $20,100 
D)  $3,200 
A)  $10,000 
B)  $12,000 
C)  $20,100 
D)  $3,200

Question 17

The statement of retained earnings informs users about how much of the earnings were kept and reinvested in the company.

Accepted Answer

A) True 
 B)False

Question 18

________ represent the right to receive cash in the future from customers for goods sold or for services performed.

Accepted Answer

A)  Accounts Receivable 
B)  Accounts Payable 
C)  Equity 
D)  Expenses 
A)  Accounts Receivable 
B)  Accounts Payable 
C)  Equity 
D)  Expenses

Question 19

Accountants assume that the dollar's purchasing power is stable.

Accepted Answer

A) True 
 B)False

Question 20

Financial statements are prepared after an entity's transactions are analyzed and recorded. Which of the following reports is one of the required financial statements?

Accepted Answer

A)  Statement of cash flows 
B)  Statement of return on assets 
C)  Statement of dividends 
D)  Expense statement 
A)  Statement of cash flows 
B)  Statement of return on assets 
C)  Statement of dividends 
D)  Expense statement

Exam 1: Accounting and the Business Environment

A creditor who has loaned money to a business has a claim to some of the assets of the business until the debt is paid.

Regarding the monetary unit assumption, which of the following statements is correct?

Which of the following is a major reason why corporate ownership is popular in the United States?

Westwood Supply Services received $1,000 cash from a customer; the amount was owed to the business from the previous month. Which of the following accounts will decrease as a result of this transaction?

In a limited-liability company (LLC), the members are personally liable for the debts of the business.

Liabilities represent creditors' claims on the business's assets.

The distribution of dividends represents an increase in retained earnings.

To be useful, accounting must be relevant and have faithful representation.

Briefly discuss each of the following corporate characteristics. A. Corporate taxation B. Separate legal entity C. No mutual agency

The creation of a corporation begins when its incorporators obtain a charter from the state.

A payable is always a liability.

Certified Public Accountants are licensed professional accountants who serve the general public.

The ultimate control of the corporation rests with the ________.

Which of the following organizations requires publicly owned companies to be audited by independent accountants (CPAs)?

Dividends are a distribution of a corporation's earnings to stockholders.

The statement of retained earnings informs users about how much of the earnings were kept and reinvested in the company.

________ represent the right to receive cash in the future from customers for goods sold or for services performed.

Accountants assume that the dollar's purchasing power is stable.

Financial statements are prepared after an entity's transactions are analyzed and recorded. Which of the following reports is one of the required financial statements?

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Investments

Current Liabilities and Payroll

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost Management Systems: Activity-Based Just-In-Time

Cost Volume Profit Analysis

Variable Costing

Master Budgets

Flexible Budgets and Standard Cost Systems

Responsibility Accounting and Performance Evaluation

Short-Term Business Decisions

Capital Investment Decisions

Understanding Accounting Information Systems and their Components

Filters