Question 1 A corporation: Is a business legally separate from its owners. Is controlled by the FASB.

Question 1  A corporation: 


Is a business legally separate from its owners.

Is controlled by the FASB.

Has shareholders who have unlimited liability for the acts of the corporation.

Is the same as a limited liability partnership.

Is not subject to double taxation. 

Question 2  Risk is: 

Net income divided by average total assets.

The reward for investment.

The uncertainty about the expected return to be earned.

Unrelated to expected return.

Derived from the idea of getting something back from an investment. 

Question 3  Owners of a corporation are called shareholders or stockholders. 

                True 

                False 

Question 4  Of the following accounts, the one that normally has a credit balance is: 

Cash.

Office Equipment.

Wages Payable.

Owner, Withdrawals.

Sales Salaries Expense.

Question 5  A financial statement providing information that helps users understand a company's financial status, and which lists the types and amounts of assets, liabilities, and equity as of a specific date, is called a(n): 

Balance sheet.

Income statement. 

Statement of cash flows.

Statement of owner's equity.

Financial Status Statement.

Question 6  Creditors' claims on the assets of a company are called: 

Net Losses.

Expenses.

Revenues.

Equity.

Liabilities.

Question 7  A customer's promise to pay is called an account payable to the seller. 

                    True 

                    False 

Question 8.  The account used to record the transfers of assets from a business to its owner is: 

A revenue account.

The owner's withdrawals account.

The owner's capital account. 

An expense account.

A liability account.

Question 9  An income statement reports on investing and financing activities. 

                   True 

                   False 

.

Question 10  External auditors examine financial statements to verify that they are prepared according to generally accepted accounting principles. 

                   True 

                   False 

.

Question 11  If equity is $300,000 and liabilities are $192,000, then assets equal: 

$108,000.

$192,000.

$300,000.

$492,000.

$792,000.

Question 12  Operating activities: 

Are the means organizations use to pay for resources like land, buildings and equipment.

Involve using resources to research, develop, purchase, produce, distribute and market products and services.

Involve acquiring and disposing of resources that a business uses to acquire and sell its products or services.

Are also called asset management.

Are also called strategic management. 

.

Question 13  If the liabilities of a business increased $75,000 during a period of time and the owner's equity in the business decreased $30,000 during the same period, the assets of the business must have: 


Decreased 105,000.

Decreased $45,000.

Increased $30,000.

Increased $45,000.

Increased $105,000.     

Question 14  Generally accepted accounting principles are the basic assumptions, concepts, and guidelines for preparing financial statements. 

                True 

                False