Deck 1: The Role of Accounting in Business

Question 1

Companies using a low-cost emphasis provide products and services that compete on features other than price.

Answer 1

False

Question 2

A business stakeholder has an interest in the economic performance of a business.

Answer 2

True

Question 3

John Deere is a leading manufacturer of agricultural machinery in the world producing products that serve unique market needs.Therefore, John Deere is an example of a company that uses a premium-price emphasis to attract customers.

Answer 3

True

Question 4

Assets are acquired through investing activities when resources are purchased.

Question 5

Merchandising businesses produce products rather than provide services to customers.

Question 6

The ownership of a proprietorship is divided into shares of stock owned by its stockholders.

Question 7

A liability is a legal obligation to repay the amount borrowed according to the terms of the borrowing agreement.

Question 8

The basic type of stock issued to owners is called common stock.

Question 9

Stockholders of a corporation are its internal stakeholders.

Question 10

A primary disadvantage of corporations is that the financial resources available to them are limited.

Question 11

A partnership is owned by two or more individuals.

Question 12

A corporation is a business that is legally separate and distinct from its owners.

Question 13

A limited liability company combines attributes of a partnership and a corporation.

Question 14

The popularity of the sole proprietorship is due to the ease and low cost of organizing.

Question 15

The objective of most businesses is to maximize profits.

Question 16

Creditors have preference to assets behind stockholders if a business fails.

Question 17

Accounting is thought to be the "language of business" because business information is communicated to stakeholders.

Question 18

All merchandising businesses are organized as corporations.

Question 19

Manufacturing businesses change basic inputs into products that are sold to individual customers.

Question 20

The branch of accounting related to the management's financial decisions is known as financial accounting.

Question 21

Capital market stakeholders have an interest in a company because:

A) they collect taxes from the company.
B) they depend upon the continued success of the company for keeping their jobs.
C) they purchase the company's products or services or sell their products or services to the company.
D) they provide major financing for the business.

Question 22

A corporation is an entity _____.

A) that is organized according to state or federal statutes and in which ownership is divided into shares of stock
B) that is known for its ease of formation
C) that terminates its existence with the death of the owner
D) that pays tax on the owner's tax returns

Question 23

What is the primary objective of most businesses?

A) To maximize profits
B) To pay dividends to stockholders
C) To provide a benefit to society
D) To manufacture a quality product

Question 24

The performance evaluation of the managers of a company is dependent on the company's:

A) common stock.
B) volatility.
C) economic performance.
D) nonrecurring activities.

Question 25

The balance sheet represents the accounting equation.

Question 26

Which of the following is not an example of a capital market stakeholder?

A) Banks
B) Owners
C) Suppliers
D) Stockholders

Question 27

Which of the following is not a characteristic of a corporation?

A) Corporations are organized as a separate legal taxable entity.
B) Ownership is divided into shares of stock.
C) Corporations experience an ease in obtaining large amounts of resources by issuing stock.
D) A corporation can elect to be taxed as a partnership.

Question 28

Which of the following businesses use a premium-price emphasis?

A) Value City Furniture selling furniture at affordable prices
B) Tommy Hilfiger selling products that have a unique image
C) Wal-Mart reselling standardized products
D) Southwest Airlines providing standardized services

Question 29

The stockholders' equity of a company should equal the sum of its total assets and total liabilities.

Question 30

Which of the following is a business stakeholder?

A) A bank
B) An employee
C) A federal government
D) All of these

Question 31

In the case of a failing company, the first claim to the company's assets lies with:

A) the state governments.
B) the creditors of the company.
C) the owners of the company.
D) the managers of the company.

Question 32

Which of the items below is not a business organization form?

A) Venture entrepreneurship
B) Proprietorship
C) Partnership
D) Corporation

Question 33

Under a _____, a business designs products that possess unique attributes or characteristics for which customers are willing to pay more.

A) premium-price emphasis
B) outreach emphasis
C) low-cost emphasis
D) customer emphasis

Question 34

Which of the following businesses buys products from other businesses to sell them to customers?

A) A merchandising business
B) A manufacturing business
C) A service business
D) An investment business

Question 35

Which of the following statements is true about a limited liability company?

A) It is organized under state or federal statutes as a separate legal entity.
B) Many professional practices such as lawyers, doctors, and accountants are organized as limited liability companies.
C) Its financial resources are limited to the individual owner's resources.
D) The frequency of this form is due to the ease and low cost of organizing.

Question 36

Which of the following types of business is popular for its ease and low cost of organizing?

A) Not-for-profit
B) Corporation
C) Partnership
D) Proprietorship

Question 37

Motel 6, a company that helps customers find budget motels across the nation, is an example of a business using which of the following?

A) Low-cost emphasis
B) Outreach emphasis
C) Customer emphasis
D) Premium-price emphasis

Question 38

A low-cost emphasis strives to provide:

A) no-frills, standardized products and services.
B) products and services that provide unique market needs.
C) products and services that provide prestige and image for customers.
D) products and services that compete on features other than price.

Question 39

The economic performance of a business is of importance to the government because:

A) of tax collections.
B) they sell their products to the business.
C) of the amount owed by them to the business.
D) all of these.

Question 40

_____ is an example of internal stakeholders.

A) Managers
B) Creditors
C) Stockholders
D) Suppliers

Question 41

Costs incurred to earn revenue are referred to as _____.

A) common stock
B) expenses
C) liabilities
D) retained earnings

Question 42

Debts owed by a business are referred to as:

A) accounts receivable.
B) equities.
C) stockholders' equity.
D) liabilities.

Question 43

Shares of ownership are evidenced by issuing:

A) shares payable.
B) commercial paper.
C) shares of stock.
D) notes payable.

Question 44

Which of the following is incurred by a business when it borrows money?

A) An accumulated depletion
B) A liability
C) A loss
D) An accrued expenditure

Question 45

The purchase of factory equipment would be an example of which type of business activity?

A) Financing
B) Investing
C) Operating
D) All of these

Question 46

Cash collected from sales during the normal course of business would be an example of which type of business activity?

A) Operating
B) Investing
C) Financing
D) None of these

Question 47

Revenues received from providing services are referred to as:

A) fees earned.
B) net income.
C) gross income.
D) retained earnings.

Question 48

Rights to payments from customers are:

A) liabilities.
B) prepaid expenses.
C) accounts receivable.
D) accounts payable.

Question 49

A list of assets, liabilities, and owners' equity as of a specific date is a(n):

A) income statement.
B) balance sheet.
C) statement of cash flows.
D) retained earnings statement.

Question 50

Reporting the financial condition of a business at a point in time and reporting the changes in the financial condition of a business over a period of time are the two major objectives of:

A) fund accounting.
B) forensic accounting.
C) not-for-profit accounting.
D) financial accounting.

Question 51

Cash investments made by the stockholders of the business are reported on the statement of cash flows in the:

A) financing activities section.
B) investing activities section.
C) operating activities section.
D) supplemental statement.

Question 52

Given the following list of accounts, calculate Total Assets: $$\begin{array} { l r } \text { Accounts Receivable } & \$ 10,000 \\\text { Capital Stock } & 20,000 \\\text { Cash } & 25,300 \\\text { Equipment } & 16,800 \\\text { Fees Earned } & 44,400 \\\text { Miscellaneous Expense } & 17,800 \\\text { Rent Expense } & 3,250 \\\text { Retained Earnings } & 7,850 \\\text { Salaries Expense } & 15,400 \\\text { Wages Expense } & 15,000\end{array}$$

A) $52,100
B) $55,300
C) $54,600
D) $40,050

Question 53

The role of accounting in business is best defined as:

A) an information system that provides reports to stakeholders about the economic activities and condition of a business.
B) a method of forecasting the future profitability of a company.
C) the policies, procedures, and strategies used in a business.
D) transaction analysis.

Question 54

Which of the following is considered an asset until consumed?

A) Accounts payable
B) Prepaid expense
C) Accounts receivable
D) Stockholders' equity

Question 55

Which of the following is an intangible asset?

A) Patent
B) Cash
C) Land
D) Equipment

Question 56

Which of the following is an appropriate representation of the accounting equation?

A) Assets + Liabilities = Stockholders' equity
B) Assets = Liabilities + Stockholders' equity
C) Assets = Liabilities
D) Assets = Liabilities + Retained earnings

Question 57

_____ is the increase in assets from selling products or services.

A) Revenue
B) Interest income
C) Equity
D) Cost of goods sold

Question 58

A note payable requires payment of the amount borrowed plus:

A) interest.
B) tax.
C) overhead.
D) dividend.

Question 59

Financing activities_____ .

A) involve obtaining funds to operate a business
B) involve obtaining assets such as buildings and equipment
C) help to earn revenues and profits
D) help to make wise investments in other companies

Question 60

The resources a business owns are called:

A) assets.
B) liabilities.
C) earnings.
D) stockholders' equity.

Question 61

Expressing financial data as if a business will continue operating for an indefinite period time refers to which concept?

A) Business entity concept
B) Going concern concept
C) Objectivity concept
D) Adequate disclosure concept

Question 62

The financial statement that presents a summary of the revenues and expenses of a business for a specific period of time, such as a month or an year, is called a(n):

A) prior period statement.
B) statement of retained earnings.
C) income statement.
D) balance sheet.

Question 63

The "rules" of accounting are called:

A) income tax regulations.
B) SEC regulations.
C) Internet rules.
D) Generally Accepted Accounting Principles.

Question 64

Pelican, Inc.had revenues of $395,000, expenses of $155,000, and dividends of $54,000 during the current year.​Based on the given information, which of the following statements is true?

A) Net income for the current year totaled $240,000.
B) Net income for the current year totaled $186,000.
C) Total retained earnings increased by $240,000 during the current year.
D) Total retained earnings decreased by $186,000 during the current year.

Question 65

Heedy Company had the following account balances in 2016 and 2017, respectively.Assuming dividends of $20,000 were paid in 2017, how much was net income? $\begin{array}{lrr} & \mathbf{2 0 1 7} & \underline{\mathbf{2 0 1 6}} \\\text { Capital Stock } & \$ 42,000 & \$ 40,000 \\\text { Retained Earnings }& x & 210,000 \\\text { Total Stockholders' Equity } & \$ 314,000 & \$ 250,000 \\\end{array}$

A) $62,000
B) $82,000
C) $272,000
D) $252,000

Question 66

Which of the following is true of rate of return on assets?

A) It is a measure of a company's profitability.
B) It is used to evaluate a company's ability to pay off its short-term debts.
C) It is used to determine the financial leverage of a company.
D) It is a measure of the optimum capital structure.

Question 67

Which of the following accounting concepts requires that the financial statements, including related notes, contain all relevant data a stakeholder would need to understand the financial condition and performance of the company?

A) The adequate disclosure concept
B) The cost concept
C) The objectivity concept
D) The matching concept

Question 68

Due to various fraudulent business practices and accounting coverups in the early 2000s, Congress enacted the Sarbanes-Oxley Act of 2002.The act was responsible for establishing a new oversight board for public accountants called the:

A) Generally Accepted Accounting Practices for Public Accountants Board.
B) Public Company Accounting Oversight Board.
C) Congressional Accounting Oversight Board.
D) Financial Accounting Standards Board.

Question 69

During 2016, Banigo Corporation experienced an increase in total assets of $72,600 and an increase in total liabilities of $40,900.Assuming that capital stock increased by $5,000 and no dividends were paid, calculate Banigo's net income or net loss for 2016.

A) Net income of $26,700
B) Net loss of $31,700
C) Net income of $67,600
D) Net loss of $45,900

Question 70

The portion of a corporation's net income that is paid out to the stockholders, instead of being retained in the business, is referred to as:

A) gross income.
B) earnings before interest and taxes.
C) interest expense.
D) dividends.

Question 71

Use the following information to determine Total Stockholders' Equity: $$\begin{array} { l r } \text { Total Assets } & \$ 85,000 \\\text { Total Liabilities } & 21,000 \\\text { Total Stockholders' Equity } & x \\\text { Total Retained Earnings } & 9,000\end{array}$$

A) $58,000
B) $64,000
C) $55,000
D) $40,000

Question 72

The portion of a corporation's net income retained in the business is called:

A) interest earnings.
B) dividends.
C) tax expense.
D) retained earnings.

Question 73

Which of the following is true about the cost principle?

A) It limits the economic data recorded in an accounting system to data related to the activities of that company.
B) It initially records assets in the accounting records at their purchase price.
C) It assumes that a company will continue in business indefinitely.
D) It reports the revenues earned by a company for a period with the expenses incurred in generating the revenues.

Question 74

The debt created by a business when it borrows from a vendor or supplier is called a(n):

A) account payable.
B) contingent liability.
C) intangible asset.
D) account receivable.

Question 75

Which of the following is the correct order for preparing financial statements?

A) Income statement, Statement of cash flows, Retained earnings statement, Balance sheet
B) Retained earnings statement, Income statement, Statement of cash flows, Balance sheet
C) Statement of cash flows, Retained earnings statement, Balance sheet, Income statement
D) Income statement, Retained earnings statement, Balance sheet, Statement of cash flows

Question 76

A summary of the cash receipts and cash payments for a specific period of time is a(n):

A) income statement.
B) balance sheet.
C) statement of cash flows.
D) retained earnings statement.

Question 77

If there was no beginning retained earnings, net income of $30,300, and ending retained earnings of $8,000, how much were dividends?

A) $38,300
B) $22,300
C) $6,000
D) $8,000

Question 78

A financial statement that summarizes the cash receipts and cash payments of a company for a specific period of time is:

A) the cash analysis statement.
B) the bank reconciliation statement.
C) the statement of cash flows.
D) the statement of retained and nonretained cash earnings.

Question 79

According to which of the following concepts should the expenses incurred when generating revenue be reported in the same period as the related revenue?

A) The cost concept
B) The periodicity concept
C) The matching concept
D) The adequate disclosure concept

Question 80

Hofnim, Inc.had the following account balances on September 30, 2016.What is Hofnim's net income for the month of September? $$\begin{array} { l r } \text { Accounts Payable } & \$ 9,900 \\\text { Capital Stock } & 15,000 \\\text { Cash } & 19,600 \\\text { Equipment } & 19,100 \\\text { Fees Earned } & 64,000 \\\text { Miscellaneous Expense } & 19,700 \\\text { Rent Expense } & 5,100 \\\text { Retained Earnings } & 5,000 \\\text { Wages Expense } & 16,450\end{array}$$

A) $8,800
B) $22,750
C) $13,260
D) $17,750