Question 1

The proprietorship form of business organization

Accepted Answer

The proprietorship form of business organization is a type of business where there is only one owner who is personally liable for all debts of the business. This means that the owner's personal assets could potentially be at risk if the business cannot pay its debts. There is no legal distinction between the business and the owner, and their records are usually combined.

Question 2

The economic entity assumption requires that the activities

Accepted Answer

The economic entity assumption requires that the activities of an entity be kept separate from the activities of its owner. This means that the financial statements of a business should only include transactions and events that are related to the business and not to the personal economic events of its owners.

Question 3

The common characteristic possessed by all assets is

Accepted Answer

The common characteristic possessed by all assets is their ability to provide future economic benefit. This includes tangible assets, such as property and equipment, as well as intangible assets, such as patents and trademarks. The value of an asset is based on its ability to generate future income or savings. Long life and great monetary value may be characteristics of some assets, but they are not universal to all assets. Additionally, not all assets are tangible in nature, as there are also intangible assets such as intellectual property or goodwill.

Question 4

The partnership form of business organization

Accepted Answer

The partnership form of business organization is a common form of organization for service-type businesses, such as law firms, accounting firms, and medical practices. Options A, C, and D are not accurate for partnerships. Partnerships are not a separate legal entity, do not enjoy an unlimited life, and do not have limited liability.

Question 5

Hyundai inc.purchased land for W122,000,000 in 2002.At December 31,2011, an appraisal determined the fair value of the land is W136,000,0000.If Hyundai follows the cost principle, the land will be reported on the statement of financial position at

Accepted Answer

Under the cost principle, assets are recorded and reported at their original purchase cost, not their current market value. Therefore, the land will be reported at W122,000,000.

Question 6

Liabilities of a company would not include

Accepted Answer

Liabilities represent debts owed by a company to others. Notes payable, accounts payable, and wages payable are all examples of liabilities, as they represent amounts that the company owes to its creditors or employees. Cash, on the other hand, is an asset, as it represents the amount of money the company has on hand.

Question 7

Which of the following is true regarding the corporate form of business organization?

Accepted Answer

Corporations generally have greater revenues than partnerships and proprietorships. While they are not the most prevalent form of business organization (sole proprietorships are), they do make up a significant portion of the business world. Corporations are separate legal entities, but they are governed under state law rather than federal law.

Question 8

A business organized as a corporation

Accepted Answer

A corporation is a separate legal entity owned by its shareholders, and it does not terminate when a shareholder dies. Shareholders are not personally liable for the corporation's debts.

Question 9

The basic accounting equation may be expressed as

Accepted Answer

The basic accounting equation is Assets = Liabilities + Equity. This equation shows that the total assets of a company are equal to the sum of its liabilities and equity.

Question 10

Asian Company purchased land for W96,000,000 in 2000.At December 31, 2011, an appraisal determined the fair value of the land is W106,000,000.The company has an investment in the ordinary shares of another company for which it paid W49,000,000 in 2009.The shares are actively traded on the South Korea Stock Exchange.The fair value of the investment at December 31, 2011 is W66,000,000.The land and investment will be reported on the December 31, 2011 statement of financial position at

Accepted Answer

Land is reported at historical cost (W96,000,000) as it is not revalued under typical accounting standards. The investment in shares is reported at fair value (W66,000,000) as it is actively traded.

Question 11

A basic assumption of accounting that requires activities of an entity be kept separate from the activities of its owner is referred to as the

Accepted Answer

The economic entity assumption is a basic assumption of accounting that requires activities of an entity be kept separate from the activities of its owner. This allows for accurate financial reporting and analysis of the entity's performance and financial position without any confusion or overlap with the personal finances of the owner. The other options - stand alone concept, monetary unit assumption, and corporate form of ownership - are not directly related to this concept.

Question 12

Equity is best depicted by the following:

Accepted Answer

Equity is the portion of a company's total assets that is owned by the shareholders, which is represented by the equation Assets - Liabilities. Therefore, choice D is the best depiction of equity.

Question 13

The assumption that enables accounting to quantify (measure) economic events is the

Accepted Answer

The monetary unit assumption assumes that only transactions that can be expressed in monetary terms are recorded in accounting, and that those transactions can be objectively measured using a common unit of currency. This assumption enables accounting to quantify (measure) economic events.

Question 14

Which of the following is not an advantage of the corporate form of business organization?

Accepted Answer

The statement "Unlimited personal liability for shareholders" is not an advantage of the corporate form of business organization. In fact, one of the main advantages of the corporate form is limited liability, meaning that shareholders are only liable for the amount of their investment in the company and are not personally responsible for the company's debts and obligations. The other options listed (limited liability, transferability of ownership, and unlimited life) are all advantages of the corporate form.

Question 15

A small neighborhood barber shop that is operated by its owner would likely be organized as a

Accepted Answer

A small neighborhood barber shop that is operated by its owner is typically organized as a proprietorship. This is because the owner has complete control over the business and is solely responsible for its profits and losses, making it a sole proprietorship.

Question 16

Liabilities

Accepted Answer

Liabilities are existing debts and obligations. They represent the amount owed by a business to its creditors or lenders. Liabilities can include accounts payable, loans, salaries payable, and taxes owed. Liabilities are an important aspect of a business's financial health as they affect its solvency and ability to meet its financial obligations.

Question 17

A business that enjoys limited liability is a

Accepted Answer

Only a corporation can enjoy limited liability. Proprietorships, partnerships, and sole proprietorships do not have separate legal identities from their owners, which means that their personal assets can be seized to pay off business debts. In contrast, a corporation has a legal identity separate from its owners, which means that its shareholders are only liable for the amount of money they have invested in the company.

Question 18

Harrod's inc.purchased land for ?50,000 in 2001.At December 31, 2010, an appraisal determined the fair value of the land is ?65,000.If Harrod's follows the cost principle, in the 2010 financial statements, the land will be reported at

Accepted Answer

Under the cost principle, assets are recorded at their historical cost and are not adjusted to reflect changes in fair value. Therefore, the land will be reported at ?50,000 on the statement of financial position.

Question 19

John and Sam met at law school and decide to start a small law practice after graduation.They agree to split revenues and expenses evenly.The most common form of business organization for a business such as this would be a

Accepted Answer

A partnership is a common form of business organization where two or more individuals come together to start a business with the goal of making a profit. In a partnership, the partners share both the profits and losses equally. This would be the most appropriate choice for John and Sam as they have decided to split revenues and expenses evenly. Option A is not a suitable choice as joint ventures usually involve a specific project or business venture for a limited period and not a long-term business arrangement. A corporation (option C) is a separate legal entity from the owners, which requires an extensive legal process and formalities to be established. A proprietorship (option D) is the simplest form of a business organization, but it is not suitable for John and Sam since they are two individuals.

Question 20

Bumi Corporation purchased an investment in the ordinary shares of another corporation for Rp250,000,000 in 2009.The shares are actively traded on the Indonesian Stock Exchange.The fair value of the investment at December 31, 2011 is Rp266,000,000.If the company follows the fair value principle, the investment will be reported in the 2011 financial statement at

Accepted Answer

Under the fair value principle, investments are reported at their fair value on the statement of financial position. Therefore, the investment will be reported at Rp266,000,000.

Quiz 1: Accounting in Action