Question 1

Salary allowances to partners when dividing net income:

Accepted Answer

A)  Are not expenses of the business.
B)  Do not get recorded.
C)  Are recorded.
D)  Are not accounted for. D

Question 2

A partnership has a limited life and each partner has unlimited personal liability.

Accepted Answer

A) True 
 B)False  True

Question 3

Personal liability of the owners for any business debts is an important consideration when selecting an appropriate form of business organization.

Accepted Answer

A) True 
 B)False  True

Question 4

When deciding the form of organization of a new business the factors to consider would be all of the following except:

Accepted Answer

A)  The need to raise large amounts of capital.
B)  The need for continuity in business operations.
C)  The potential profits of the organization.
D)  The personal liabilities of the owners.

Question 5

Which of the following is a characteristic of a corporation?

Accepted Answer

A)  Declaration of a dividend by the stockholders.
B)  Appointment of officers by the stockholders.
C)  Transferability of shares of stock.
D)  Unlimited liability.

Question 6

Retained earnings are a fund of cash the business has earned from profitable operations.

Accepted Answer

A) True 
 B)False

Question 7

Paid-in Capital

Accepted Answer

A)  The lifetime earnings of the corporation.
B)  The amount invested by stockholders.
C)  Net income less dividends.
D)  The amount in excess of the par value of the stock.

Question 8

When a corporation receives cash or other assets from its owners in a sale of capital stock,it records these investment transactions by crediting Retained Earnings.

Accepted Answer

A) True 
 B)False

Question 9

When closing Income Summary,assuming the corporation had net income for the accounting period,the account Retained Earnings is credited.

Accepted Answer

A) True 
 B)False

Question 10

An S corporation must have a maximum of ____ stockholders.

Accepted Answer

A)  25
B)  65
C)  70
D)  75

Question 11

Partner A earns $68,000 from a partnership.Partner B earns $57,000 but withdraws only $49,000.How much must Partner B report in his income tax return as income?

Accepted Answer

A)  $49,000.
B)  $57,000.
C)  $125,000.
D)  $117,000.

Question 12

Mutual agency refers to the ability of each partner to withdraw cash and other assets at will.

Accepted Answer

A) True 
 B)False

Question 13

Limited personal liability is a characteristic of a sole proprietorship.

Accepted Answer

A) True 
 B)False

Question 14

The adjusting entry to record income taxes in an unprofitable period would debit Income Tax Payable and credit Income Tax Expense.

Accepted Answer

A) True 
 B)False

Question 15

The adjusting entry to recognize income taxes due on a profit of $100,000 and a tax rate of 40% is:

Accepted Answer

A)  A Above.
B)  B Above.
C)  C Above.
D)  D Above.

Question 16

The retained earnings account of Company XYZ has a balance of $350,000 at the end of 2014.At the end of 2015 the following information is available.  What is the amount of retained earnings at the end of 2015?

Accepted Answer

The answer of The retained earnings account of Company XYZ...

Question 17

Retained Earnings represent:

Accepted Answer

A)  The profits of the company.
B)  The investments of the owners.
C)  The profits of the company plus the investments of the owners.
D)  The total earnings of the company,less the dividends distributed to the owners and less any losses.

Question 18

The journal entry when a dividend is declared for $150,000 would be:

Accepted Answer

A)  A Above.
B)  B Above.
C)  C Above.
D)  D Above.

Question 19

The Board of Directors of a corporation:

Accepted Answer

A)  Are not responsible for hiring other professional managers.
B)  Do not decide whether profits will be distributed to stockholders.
C)  Make major policy decisions.
D)  Are members of a government agency.

Question 20

In a sole proprietorship the balance in the Income Summary account is closed to:

Accepted Answer

A)  Retained earnings.
B)  Capital.
C)  Drawing.
D)  Net Income.

Exam 27: Forms of Business Organization

Salary allowances to partners when dividing net income:

A partnership has a limited life and each partner has unlimited personal liability.

Personal liability of the owners for any business debts is an important consideration when selecting an appropriate form of business organization.

When deciding the form of organization of a new business the factors to consider would be all of the following except:

Which of the following is a characteristic of a corporation?

Retained earnings are a fund of cash the business has earned from profitable operations.

Paid-in Capital

When a corporation receives cash or other assets from its owners in a sale of capital stock,it records these investment transactions by crediting Retained Earnings.

When closing Income Summary,assuming the corporation had net income for the accounting period,the account Retained Earnings is credited.

An S corporation must have a maximum of ____ stockholders.

Partner A earns $68,000 from a partnership.Partner B earns $57,000 but withdraws only $49,000.How much must Partner B report in his income tax return as income?

Mutual agency refers to the ability of each partner to withdraw cash and other assets at will.

Limited personal liability is a characteristic of a sole proprietorship.

The adjusting entry to record income taxes in an unprofitable period would debit Income Tax Payable and credit Income Tax Expense.

The adjusting entry to recognize income taxes due on a profit of $100,000 and a tax rate of 40% is:

The retained earnings account of Company XYZ has a balance of $350,000 at the end of 2014.At the end of 2015 the following information is available. What is the amount of retained earnings at the end of 2015?

Retained Earnings represent:

The journal entry when a dividend is declared for $150,000 would be:

The Board of Directors of a corporation:

In a sole proprietorship the balance in the Income Summary account is closed to: