Deck 1: The Role of Accounting in Business

Question 1

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 1

True

Question 2

A partnership is owned by two or more individuals.

Answer 2

True

Question 3

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

Answer 3

True

Question 4

All merchandising businesses are organized as corporations.

Question 5

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

Question 6

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

Question 7

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

Question 8

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

Question 9

Merchandising businesses produce products rather than provide services to customers.

Question 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

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

Question 15

Stockholders of a corporation are its internal stakeholders.

Question 16

The objective of most businesses is to maximize profits.

Question 17

Assets are acquired through investing activities when resources are purchased.

Question 18

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

Question 19

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

Question 20

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

Question 21

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 22

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 23

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 24

The balance sheet represents the accounting equation.

Question 25

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 26

Who has the first preference to assets in case a business fails?

A)Stockholders
B)Long-term creditors
C)Customers
D)Employees

Question 27

Which of the following are business stakeholders?

A)Stockholders
B)Suppliers
C)Customers
D)All of these

Question 28

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

Question 29

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

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

Question 30

Capital market stakeholders have an interest in the company because:

A)they provide incentives for the company to market their products.
B)they are part of the Marketing Department that is responsible for promoting the products or services to increase the business profits.
C)they help market their products to customers or find vendors to supply needed inputs.
D)they provide major financing for the business.

Question 31

Which of the following would not be an example of a merchandising business?

A)The Walt Disney Company
B)JCPenney
C)Amazon.com
D)Wal-Mart

Question 32

is an example of internal stakeholders.

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

Question 33

Governments have an interest in the economic performance of business because of:

A)tax collections.
B)community involvement from the business.
C)business incentives.
D)all of these.

Question 34

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 35

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 36

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

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

Question 37

Managers are evaluated primarily on the business's:

A)tax collections.
B)growth.
C)economic performance.
D)all of these.

Question 38

Which of the following is true about limited liability company?

A)It is taxed as a separate legal entity.
B)It combines attributes of a partnership and a corporation.
C)Its financial resources are limited to the individual owner's resources.
D)Its formation process is complex.

Question 39

A corporation is .

A)an entity that is organized according to state or federal statutes and in which ownership is divided into shares of stock
B)an entity that is owned by an individual
C)an entity which has unlimited liability to creditors for the debts of the company
D)an entity which has limited access to capital

Question 40

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 41

Rights to payments from customers are:

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

Question 42

Which of the following is considered an asset until consumed?

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

Question 43

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 44

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 45

Shares of ownership are evidenced by issuing:

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

Question 46

Given the following list of accounts,calculate Total Assets:

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

Question 47

is the increase in assets from selling products and services.

A)Revenue
B)Liabilities
C)Products
D)Stockholders' Equity

Question 48

Costs incurred in operating a business are also known as:

A)revenues.
B)expenses.
C)liabilities.
D)dividends.

Question 49

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 50

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 51

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 52

A note payable requires payment of the amount borrowed plus:

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

Question 53

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 54

The resources a business owns are called:

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

Question 55

Debts owed by a business are referred to as:

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

Question 56

Which of the following is an intangible asset?

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

Question 57

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 58

When a business borrows money,it incurs a(n):

A)tax.
B)liability.
C)receivable.
D)additional equity.

Question 59

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

A)tax accounting.
B)union contracts.
C)managerial accounting.
D)financial accounting.

Question 60

When a product is sold,the cost of the product sold is often called:

A)cost of goods sold.
B)selling cost.
C)period cost.
D)retained cost.

Question 61

Use the following information to determine Total Stockholders' Equity:

A)$58,000
B)$27,000
C)$32,000
D)$40,000

Question 62

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 63

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 64

The debt created by a business when it makes a purchase on account is referred to as an:

A)account payable.
B)account receivable.
C)asset.
D)expense payable.

Question 65

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 short­term debts.
C)It is used to determine the financial leverage of a company.
D)It is a measure of the optimum capital structure.

Question 66

During 2015,Trinder Corporation had an increase in total assets of $80,000 and an increase in total liabilities of $60,000.Assuming that capital stock increased by $8,000 and no dividends were paid,calculate Trinder's net income or net loss for 2015.

A)Net income of $12,000
B)Net income of $72,000
C)Net income of $28,000
D)Net loss of $20,000

Question 67

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 68

Tadeo,Inc.had the following account balances at September 30,2015.What is Tadeo's net income for the month of September?

A)$10,800
B)$14,350
C)$14,450
D)$27,500

Question 69

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 70

The "rules" of accounting are called:

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

Question 71

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 72

Heedy Company had the following account balances in 2015 and 2016,respectively.Assuming dividends of $20,000 were paid in 2016,how much was net income?

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

Question 73

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 74

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 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

Recording revenue when a sale is made most directly relates to which concept?

A)Going concern concept
B)Periodicity concept
C)Matching concept
D)Adequate disclosure concept

Question 77

A summary of changes in the earnings retained by the corporation for a specific period of time is known as a(n):

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

Question 78

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 79

Univeo,Inc.had revenues of $245,000,expenses of $180,000,and dividends of $45,000 during 2015.Which of the following statements is correct?

A)Net income for 2015 totaled $65,000.
B)Net income for 2015 totaled $20,000.
C)Total retained earnings increased by $65,000 during 2015.
D)Total retained earnings decreased by $20,000 during 2015.

Question 80

Including all relevant data a reader needs to understand the financial condition and performance of a business refers to which concept?

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