(Test Bank) Acc 556 Week 5 Midterm Exam Strayer New 2023

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ACC 556 Week 5 Midterm Exam – Strayer NEW Click On The Link Below To Purchase A+ Graded Material Instant Download http://www.hwgala.com/ACC-556-Midterm-Exam-Week-5-Strayer-NEW-ACC556W5E.htm Chapters 1 Through 8 CHAPTER 1 INTRODUCTION TO FINANCIAL STATEMENTS TRUE-FALSE STATEMENTS 1.A business organized as a separate legal entity owned by stockholders is a partnership. 2.Corporate stockholders generally pay higher taxes but have no personal liability. 3.The liability of corporate stockholders is limited to the amount of their investment. 4.The majority of U.S. business is transacted by proprietorships. 5.Proprietorships in the United States generate more revenue than the other two forms of business enterprise. 6.Owners of business firms are the only people who need accounting information. 7.Management of a business enterprise is the major external user of information. 8.External users of accounting information are managers who plan, organize, and run a business. 9.The information needs and questions of external users vary considerably. 10.Accounting communicates financial information about a business to both internal and external users. FOR INSTRUCTOR USE ONLYA Further Look at Financial Statements 11.Two primary external users of accounting information are investors and creditors. 12.Financing activities for corporations include borrowing money and selling shares of their own stock. 13.Investing activities involve collecting the necessary funds to support the business. FOR INSTRUCTOR USE ONLY2-2A Further Look at Financial Statements 14.The purchase of equipment is an example of a financing activity. 15.Assets are resources owned by a business and provide future services or benefits to the business. 16.Payments to owners are operating activities. 17.The economic resources that are owned by a business are called stockholders’ equity. 18.Operating activities involve putting the resources of the business into action to generate a profit. 19.A business is usually involved in two types of activity—financing and investing. 20.Net income for the period is determined by subtracting total expenses and dividends from revenues. 21.A different set of financial statements usually is prepared for each user. 22.The heading for the income statement might include the line “As of December 31, 20xx.” 23.Net income is another term for revenue. 24.Cash is another term for stockholders’ equity. 25.The primary purpose of the statement of cash flows is to provide information about the cash receipts and cash payments of a company for a specific period of time. 26.The balance sheet reports assets and claims to those assets at a specific point in time. FOR INSTRUCTOR USE ONLY2-3A Further Look at Financial Statements 27.The basic accounting equation states that Assets = Liabilities. 28.One way of stating the accounting equation is: Assets + Liabilities = Stockholders’ Equity. 29.The accounting equation can be expressed as Assets - Stockholders’ Equity = Liabilities. 30.The accounting equation can be expressed as Assets - Liabilities = Stockholders’ Equity. 31.If the assets owned by a business total $150,000 and liabilities total $105,000, stockholders’ equity totals $45,000. 32.If the assets owned by a business total $100,000 and liabilities total $65,000, stockholders’ equity totals $25,000. 33.Claims of creditors and owners on the assets of a business are called liabilities. 34.Creditors’ rights to assets supersede owners’ rights to the assets. 35.All publicly traded U.S. companies must provide their stockholders with an annual report each year. 36.Information in the notes to the financial statements has to be quantifiable (numeric). 37.An auditor is an accounting professional who conducts an independent examination of the accounting data presented by a company. 38.The management discussion and analysis (MD & A) section of an annual report covers various financial aspects of a company. 39.Explanatory notes and supporting schedules are an optional part of an annual report. FOR INSTRUCTOR USE ONLY2-4A Further Look at Financial Statements 40.Examples of notes are descriptions of the significant accounting policies and methods used in preparing the statements, explanations of contingencies, and various statistics. MULTIPLE CHOICE QUESTIONS 41.The proprietorship form of business organization a.must have at least two owners in most states. b.generally receives favorable tax treatment relative to a corporation. c.combines the records of the business with the personal records of the owner. d.is classified as a separate legal entity. 42.A business organized as a corporation a.is not a separate legal entity in most states. b.requires that stockholders be personally liable for the debts of the business. c.is owned by its stockholders. d.has tax advantages over a proprietorship or partnership. 43.The partnership form of business organization a.is a separate legal entity. b.is a common form of organization for service-type businesses. c.enjoys an unlimited life. d.has limited liability. 44.Which of the following is not one of the three forms of business organization? a.Corporations b.Partnerships c.Proprietorships d.Investors FOR INSTRUCTOR USE ONLY2-5A Further Look at Financial Statements 45.Most business enterprises in the United States are a.proprietorships and partnerships. b.partnerships. c.corporations. d.government units. 46.A business organized as a separate legal entity is a a.corporation. b.proprietor. c.government unit. d.partnership. 47.Which of the following is not an advantage of the corporate form of business organization? a.No personal liability b.Easy to transfer ownership c.Favorable tax treatment d.Easy to raise funds 48.An advantage of the corporate form of business is that a.it has limited life. b.its owner’s personal resources are at stake. c.its ownership is easily transferable via the sale of shares of stock. d.it is simple to establish. 49.Which of the following is an advantage of corporations relative to partnerships and sole proprietorships? a.Reduced legal liability for investors b.Harder to transfer ownership c.Lower taxes d.Most common form of organization 50.A corporation has which of the following set of characteristics? a.Shared control, tax advantages, increased skills and resources b.Simple to set up and maintains control with founder c.Easier to transfer ownership and raise funds, no personal liability d.Harder to raise funds and gives owner control FOR INSTRUCTOR USE ONLY2-6A Further Look at Financial Statements 51.A small neighborhood barber shop that is operated by its owner would likely be organized as a a.joint venture. b.partnership. c.corporation. d.proprietorship. 52.A local retail shop has been operating as a sole proprietorship. The business is growing and now the owner wants to incorporate. Which of the following is not a reason for this owner to incorporate? a.Ability to raise capital for expansion b.Desire to limit the owner’s personal liability c.The prestige of operating as a corporation d.The ease in transferring shares of the corporation’s stock 53.All of the following are advantages for choosing a proprietorship for a business except a.a proprietorship is a simple form of business to set up. b.a proprietorship gives the owner control of the business. c.proprietorship receive more favorable tax treatment. d.transfer of ownership is easily achieved through stock sales. 54.Jack and Jill form a partnership. Jack runs the business in New York, while Jill vacations in Hawaii. During the time Jill is away from the business, Jack increases the debts of the business by $20,000. Which of the following statements is true regarding this debt? a.Only Jack is personally liable for the debt, since he has been the managing partner during that time. b.Only Jill is personally liable for the debt of the business, since Jack has been working and she has not. c.Both Jack and Jill are personally liable for the business debt. d.Neither Jack nor Jill is personally liable for the business debt, since the partnership is a separate legal entity. 55.Which one of the following questions is most likely asked by an internal human resources director for the company? a.Which product line is most profitable? b.What price for our product will maximize the company income? c.What average pay raise is affordable for employees this year? d.Should any product lines be eliminated? FOR INSTRUCTOR USE ONLY2-7A Further Look at Financial Statements 56.Which of the following are internal reports that accounting provides to internal users? a.Forecasts of cash needs for next year. b.Financial comparisons of operating activity alternatives. c.Both forecasts of cash needs and financial comparisons are internal reports. d.Neither forecasts of cash needs or financial comparisons is an internal report. 57.Which of the following is the best definition of an internal user of accounting information? a.Investors who use accounting information to decide whether to buy or sell stock. b.Creditors like banks that use accounting information to evaluate the risk of lending money. c.Labor unions who use accounting information to examine the ability of the company to pay increased wages and benefits. d.Managers who use accounting information to plan, organize, and run a business. 58.External users of accounting information, like the Internal Revenue Service, are most commonly known as a.taxing authorities. b.labor unions. c.customers. d.regulatory agencies. 59.Which of the following statements is not true regarding the Sarbanes-Oxley Act (SOX)? a.The Act calls for increased oversight responsibilities for boards of directors. b.The Act has resulted in increased penalties for financial fraud by top management. c.The Act calls for decreased independence of outside auditors reviewing corporate financial statements. d.The Act is meant to decrease the likelihood of unethical corporate behavior. 60.Which of the following is not a step for solving an ethical dilemma? a.Identifying the alternatives and weighing the impact of each alternative on various stakeholders. b.Certifying the ethical accuracy of the financial information. c.Identifying and analyzing the principal elements in the situation. d.Recognizing the ethical situation and issues involved. 61.Which of the following is the most appropriate and modern definition of accounting? a.The information system that identifies, records, and communicates the economic events of an organization to interested users. b.A means of collecting information. c.The interconnected network of subsystems necessary to operate a business. d.Electronic collection, organization, and communication of vast amounts of information. FOR INSTRUCTOR USE ONLY2-8A Further Look at Financial Statements 62.Which of the following would not be considered an internal user of accounting data for the Xanadu Company? a.President of the company b.Production manager c.Merchandise inventory clerk d.President of the employees' labor union 63.Which of the following groups uses accounting information primarily to insure the entity is operating within prescribed rules? a.Taxing authorities b.Regulatory agencies c.Labor Unions d.Management 64.The group of users of accounting information charged with achieving the goals of the business is its a.auditors. b.investors. c.managers. d.creditors. 65.Which of the following groups uses accounting information to determine whether the company can pay its obligations? a.Investors in common stock b.Marketing managers c.Creditors d.Chief Financial Officer 66.Which of the following groups uses accounting information to determine whether the company’s net income will result in a stock price increase? a.Investors in common stock b.Marketing managers c.Creditors d.Chief Financial Officer 67.Which of the following groups uses accounting information to determine whether a marketing proposal will be cost effective? a.Investors in common stock b.Marketing managers c.Creditors d.Chief Financial Officer FOR INSTRUCTOR USE ONLY2-9A Further Look at Financial Statements 68.Which of the following would not be considered an external user of accounting data for the Julian Company? a.Internal Revenue Service agent b.Management c.Creditors d.Customers 69.Which of the following would not be considered an internal user of accounting data for a company? a.The president of a company b.The controller of a company c.Creditor of a company d.Salesperson of a company 70.Which of the following is a primary user of accounting information with a direct financial interest in the business? a.Taxing authority b.Creditor c.Regulatory agency d.Labor union 71.Which of the following is a user of accounting information with an indirect financial interest in a business? a.A financial adviser b.Management c.Investor d.Creditor 72.Which type of corporate information is readily available to investors? a.Financial comparison of operating alternatives b.Marketing strategies for a product that will be introduced in eighteen months c.Forecasts of cash needs for the upcoming year d.Amount of net income retained in the business 73.Which of the following statements concerning users of accounting information is incorrect? a.Management is considered an internal user. b.Present creditors are considered external users. c.Regulatory authorities are considered internal users. d.Taxing authorities are considered external users. FOR INSTRUCTOR USE ONLY2-10A Further Look at Financial Statements 74.External users want answers to all of the following questions except a.Is the company earning satisfactory income? b.Will the company be able to pay its debts as they come due? c.Will the company be able to afford employee pay raises this year? d.How does the company compare in profitability with competitors? 75.Which type of corporate information is not available to investors? a.Dividend history b.Forecast of cash needs for the upcoming year c.Cash provided by investing activities d.Beginning cash balance 76.The liability created by a business when it purchases coffee beans and coffee cups on credit from suppliers is termed a(n) a.account payable. b.account receivable. c.revenue. d.expense. 77.The right to receive money in the future is called a(n) a.account payable. b.account receivable. c.liability. d.revenue. 78.Which of the following is not a principal type of business activity? a.Operating b.Investing c.Financing d.Delivering 79.Borrowing money is an example of a(n) a.delivering activity. b.financing activity. c.investing activity. d.operating activity. FOR INSTRUCTOR USE ONLY2-11A Further Look at Financial Statements 80.Issuing shares of stock in exchange for cash is an example of a(n) a.delivering activity. b.investing activity. c.financing activity. d.operating activity. 81.Debt securities sold to investors that must be repaid at a particular date some years in the future are called a.accounts payable. b.notes receivable. c.taxes payable. d.bonds payable. 82.Which of the following activities involves collecting the necessary funds to support the business? a.Operating b.Investing c.Financing d.Delivering 83.Buying assets needed to operate a business is an example of a(n) a.delivering activity. b.financing activity. c.investing activity. d.operating activity. 84.Which activities involve acquiring the resources to run the business? a.Delivering b.Financing c.Investing d.Operating 85.Which activities involve putting the resources of the business into action to generate a profit? a.Delivering b.Financing c.Investing d.Operating FOR INSTRUCTOR USE ONLY2-12A Further Look at Financial Statements 86.The statement of cash flows would disclose the payment of a dividend a.nowhere on the statement. b.in the operating activities section. c.in the investing activities section. d.in the financing activities section. 87Buying and selling products are examples of a.operating activities. b.investing activities. c.financing activities. d.delivering activities. 88.The common characteristic possessed by all assets is a.long life. b.great monetary value. c.tangible nature. d.future economic benefit. 89.Expenses are incurred a.only on rare occasions. b.to produce assets. c.to produce liabilities. d.to generate revenues. 90.The cost of assets consumed or services used is also known as a.a revenue. b.an expense. c.a liability. d.an asset. 91.Resources owned by a business are referred to as a.stockholders’ equity. b.liabilities. c.assets. d.revenues. 92.The best definition of assets is the a.cash owned by the company. b.collections of resources belonging to the company and the claims on these resources. c.owners’ investment in the business. d.resources belonging to a company that have future benefit to the company. FOR INSTRUCTOR USE ONLY2-13A Further Look at Financial Statements 93.Debts and obligations of a business are referred to as a.assets. b.equities. c.liabilities. d.expenses. 94.Jackson Company recorded the following cash transactions for the year: Paid $135,000 for salaries. Paid $60,000 to purchase office equipment. Paid $15,000 for utilities. Paid $6,000 in dividends. Collected $245,000 from customers. What was Jackson’s net cash provided by operating activities? a.$95,000 b.$35,000 c.$110,000 d.$89,000 95.Gibson Company recorded the following cash transactions for the year: Paid $180,000 for salaries. Paid $80,000 to purchase office equipment. Paid $20,000 for utilities. Paid $8,000 in dividends. Collected $310,000 from customers. What was Gibson’s net cash provided by operating activities? a.$110,000 b.$30,000 c.$130,000 d.$102,000 96.When expenses exceed revenues, which of the following is true? a.a net loss results b.a net income results c.assets equal liabilities d.assets are increased 97.Which of the following is an asset? a.Mortgage payable b.Investments c.Common stock d.Retained earnings FOR INSTRUCTOR USE ONLY2-14A Further Look at Financial Statements 98.Which of the following is not a liability? a.Unearned Service Revenue b.Accounts Payable c.Accounts Receivable d.Interest Payable 99.Which of the following financial statements is divided into major categories of operating, investing, and financing activities? a.The income statement. b.The balance sheet. c.The retained earnings statement. d.The statement of cash flows. 100.The retained earnings statement shows all of the following except a.the amounts of changes in retained earnings during the period. b.the causes of changes in retained earnings during the period. c.the time period following the one shown for the income statement. d.beginning retained earnings on the first line of the statement. 101.Ending retained earnings for a period is equal to beginning a.Retained earnings + Net income + Dividends b.Retained earnings – Net income – Dividends c.Retained earnings + Net income – Dividends d.Retained earnings – Net income + Dividends 102.Which of the following statements is true? a.Amounts received from issuing stock are revenues. b.Amounts paid out as dividends are not expenses. c.Amounts paid out as dividends are reported on the income statement. d.Amounts received from issued stock are reported on the income statement. 103.Dividends are reported on the a.income statement. b.retained earnings statement. c.balance sheet. d.income statement and balance sheet. 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