TEST BANK
Financial Accounting Tools For Business Decision
Making, 10th Edition, Paul D. Kimmel,
Chapters 1 – 13, Complete
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use Only)
,TABLE OF CONTENTS
1 Introduction to Financial Statements
2 A Further Look at Financial Statements
3 The Accounting Information System
4 Accrual Accounting Concepts
5 Merchandising Operations and the Multiple-Step Income Statement
6 Reporting and Analyzing Inventory
7 Fraud, Internal Control, and Cash
8 Reporting and Analyzing Receivables
9 Reporting and Analyzing Long-Lived Assets
10 Reporting and Analyzing Liabilities
11 Reporting and Analyzing Stockholders’ Equity
12 Statement of Cash Flows
13 Financial Analysis: The Big Picture
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use Only)
,CHAPTER 1
INTRODUCTION TO FINANCIAL STATEMENTS
CHAPTER LEARNING OBJECTIVES
1. Identify the forms of business organization and the uses of accounting information. A sole
proprietorship is a business owned by one person. A partnership is a business owned by two or more
people associated as partners. A corporation is a separate legal entity for which evidence of ownership is
provided by shares of stock. Internal users are managers who need accounting information to plan,
organize, and run business operations. The primary external users are investors and creditors. Investors
(stockholders) use accounting information to decide whether to buy, hold, or sell shares of a company‘s
stock. Creditors (suppliers and bankers) use accounting information to assess the risk of granting credit or
loaning money toa business. Other groups who have an indirect interest in a business are taxing authorities,
customers, labor unions, and regulatory agencies.
2. Explain the three principal types of business activity. Financing activities involve collecting the
necessary funds to support the business. Investing activities involve acquiring the resources necessary to
run the business. Operating activities involve putting the resources of the business into action to generate
a profit.
3. Describe the four financial statements and how they are prepared. An income statement presents the
revenues and expenses of a company for a specific period of time. A retained earnings statement
summarizes the changes in retained earnings that have occurred for a specific period of time. A balance
sheet reports the assets, liabilities, and stockholders‘ equity of a business at a specific date. A statement of
cash flows summarizes information concerning the cash inflows (receipts) and outflows (payments) for a
specific period of time. Assets are resources owned by a business. Liabilities are the debts and obligations
of the business. Liabilities represent claims of creditors on the assets of the business. Stockholders‘ equity
represents the claims of owners on the assets of the business. Stockholders‘ equity is subdivided into two
parts: common stock and retained earnings. The basic accounting equation is Assets = Liabilities +
Stockholders‘ Equity. Within the annual report, the management discussion and analysis provides
management‘s interpretation of the company‘s results and financial position as well as a discussion of plans
for the future. Notes to the financial statements provide additional explanation or detail to make the
financial statements more informative. The auditor‘s report expresses an opinion as to whether the
financialstatements present fairly the company‘s results of operations and financial position.
*4. Explain the career opportunities in accounting. Accounting offers many different jobs in fields such as
public and private accounting, governmental, and forensic accounting. Accounting is a popular major
because there are many different types of jobs, with unlimited potential for career advancement
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use Only)
,2-2 Test Bank for Kimmel, Financial Accounting: Tools for Business Decision Making, 10e
Difficulties:
Easy: 143
Medium: 101
Hard: 12
Question List by Section
Business Organization and Accounting Information Uses:Forms
of Business Organization; 47, 48, 202, 246
Sole Proprietorship: 5, 44, 49, 58, 59
Partnership: 1, 4, 46, 56
Corporation: 2, 3, 45, 50, 51, 52, 53, 55, 57, 233, 245
Hybrid Forms of Organization: 60, 61
Users and Uses of Financial Information: 6, 7, 11, 74, 87
Internal Users: 62, 63, 64, 75, 77, 82, 234
External Users: 8, 9, 10, 12, 65, 76, 78, 79, 80, 81, 83, 84, 85, 86, 88, 89
Data Analytics: 66, 67, 68, 69, 70, 235, 236
Ethics in Financial Reporting: 71, 72, 73, 237, 255The
Three Types of Business Activity: 97
Financing Activities: 13, 15, 18, 90, 91, 93, 94, 95, 96, 97, 102, 109, 117, 118, 119, 238
Investing Activities: 14, 16, 98, 99, 115, 116
Operating Activities: 17, 19, 20, 100, 101, 103, 104, 105, 106, 107, 108, 110, 111, 112, 113,
114
The Four Financial Statements:
Income Statement: 21, 22, 23, 24,127, 128, 132, 133, 134, 138, 142, 143
Retained Earnings Statement: 120, 122, 123, 124, 125, 126, 129, 130, 131, 135, 137, 139, 140,
141, 144, 145, 146, 147, 148, 149, 150, 154, 164, 169, 178, 181, 252
Balance Sheet: 25, 27, 28, 29, 30, 31, 32, 33, 34, 35, 136, 151, 152, 153, 163, 165, 166, 168,
170, 173, 177, 179, 180, 182, 185, 186, 187, 188, 199, 200, 201, 207, 208, 213, 214, 215, 216,
217, 218, 219, 220, 221, 222, 225, 229, 239, 240, 241, 253
Statement of Cash Flows: 26, 121, 171, 174, 183, 242, 249
Interrelationships of Statements: 155, 156, 157, 158, 159, 160, 161, 162, 167, 175, 176, 184,
250, 251, 256
Elements of an Annual Report: 36, 41, 192, 196, 197
Management Discussion and Analysis: 40, 191
Notes to the Financial Statements: 37, 42, 190, 193, 194, 198, 254
Auditor‘s Report: 38, 39, 195
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use Only)
, A Further Look at Financial Statements 2-3
TRUE-FALSE STATEMENTS
1. A business organized as a separate legal entity and owned by stockholders is apartnership.
Ans: F, LO: 1, Section: Business Organization and Accounting Information Uses, Subsection: Partnership, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge,
AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
2. Corporate stockholders have no personal liability for the debts of the corporation.
Ans: T, LO: 1, Section: Business Organization and Accounting Information Uses, Subsection: Corporation, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge,
AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
3. The liability of corporate stockholders is limited to the amount of their investment.
Ans: T, LO: 1, Section: Business Organization and Accounting Information Uses, Subsection: Corporation, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge,
AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
4. The majority of U.S. business is transacted by partnerships.
Ans: F, LO: 1, Bloom: K, Section: Business Organization and Accounting Information Uses, Subsection: Partnership, Difficulty: Easy, Min: 1, AACSB: Knowledge,
AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
5. Sole proprietorships in the United States generate more revenue than the other two formsof business
enterprise.
Ans: F, LO: 1, Section: Business Organization and Accounting Information Uses, Subsection: Sole Proprietorship, Bloom: K, Difficulty: Easy, Min: 1, AACSB:
Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
6. Owners of business firms are the only people who need accounting information.
Ans: F, LO: 1, Section: Business Organization and Accounting Information Uses, Subsection: Users and Uses of Financial Information, Bloom: K, Difficulty: Easy,
Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
7. Some users of accounting information are internal to the company while others areexternal.
Ans: T, LO: 1, Section: Business Organization and Accounting Information Uses, Subsection: Users and Uses of Financial Information, Bloom: K, Difficulty: Easy,
Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
8. Management of a business enterprise is the major external user of accountinginformation.
Ans: F, LO: 1, Section: Business Organization and Accounting Information Uses, Subsection: External Users, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge,
AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
9. External users of accounting information include managers who plan, organize, and run abusiness.
Ans: F, LO: 1, Section: Business Organization and Accounting Information Uses, Subsection: External Users, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge,
AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
10. The accounting information needs and questions of external users vary considerably.
Ans: T, LO: 1, Section: Business Organization and Accounting Information Uses, Subsection: External Users, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge,
AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
11. Accounting communicates financial information about a business to both internal andexternal
users.
Ans: T, LO: 1, Section: Business Organization and Accounting Information Uses, Subsection: Users and Uses of Financial Information, Bloom: K, Difficulty: Easy,
Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
12. Two primary external users of accounting information are investors and creditors.
Ans: T, LO: 1, Section: Business Organization and Accounting Information Uses, Subsection: External Users, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge,
AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
13. Financing activities for corporations include borrowing money and selling shares of their
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use Only)
,2-4 Test Bank for Kimmel, Financial Accounting: Tools for Business Decision Making, 10e
own stock.
Ans: T, LO: 2, Section: The Three Types of Business Activity, Subsection: Financing Activities, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None,
AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
14. Investing activities involve collecting the necessary funds to support the business.
Ans: F, LO: 2, Section: The Three Types of Business Activity, Subsection: Investing Activities, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None,
AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
15. The purchase of equipment is an example of a financing activity.
Ans: F, LO: 2, Section: The Three Types of Business Activity, Subsection: Financing Activities, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None,
AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
16. Assets are resources owned by a business that provide future services or benefits to thebusiness.
Ans: T, LO: 2, Section: The Three Types of Business Activity, Subsection: Investing Activities, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None,
AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
17. Payments by the business to its owners are operating activities.
Ans: F, LO: 2, Section: The Three Types of Business Activity, Subsection: Operating Activities, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None,
AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
18. The economic resources owned by a business are called stockholders‘ equity.
Ans: F, LO: 2, Section: The Three Types of Business Activity, Subsection: Financing Activities Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None,
AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
19. Operating activities involve putting the resources of the business into action to generate aprofit.
Ans: T, LO: 2, Section: The Three Types of Business Activity, Subsection: Operating Activities, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None,
AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
20. A business is usually involved in only two types of activities—financing and investing.
Ans: F, LO: 2, Section: The Three Types of Business Activity, Subsection: Operating Activities, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None,
AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
21. Net income for the period is determined by subtracting expenses and dividends fromrevenues.
Ans: F, LO: 3, Section: The Four Financial Statements, Subsection: Income Statement, Bloom: K, Difficulty: Medium, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA
AC: Reporting, AICPA PC: None, IMA: Reporting and Control
22. A different set of financial statements is usually prepared for each user.
Ans: F, LO: 3, Section: The Four Financial Statements, Subsection: Income Statement, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA
AC: Reporting, AICPA PC: None, IMA: Reporting and Control
23. The heading for an income statement prepared for the year ending December 31, 2025will include
the line ―As of December 31, 2025.‖
Ans: F, LO: 3, Section: The Four Financial Statements, Subsection: Income Statement, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA
AC: Reporting, AICPA PC: None, IMA: Reporting and Control
24. Net income is another term for revenue.
Ans: F, LO: 3, Section: The Four Financial Statements, Subsection: Income Statement, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA
AC: Reporting, AICPA PC: None, IMA: Reporting and Control
25. Cash is another term for stockholders‘ equity.
Ans: F, LO: 3, Section: The Four Financial Statements, Subsection: Balance Sheet, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC:None, AICPA AC:
Reporting, AICPA PC: None, IMA: Reporting and Control
26. The primary purpose of the statement of cash flows is to provide information about the
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use Only)
, A Further Look at Financial Statements 2-5
cash receipts and cash payments of a company for a specific period of time.
Ans: T, LO: 3, Section: The Four Financial Statements, Subsection: Statement of Cash Flows, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None,
AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
27. The balance sheet reports assets and claims to those assets at a specific point in time.
Ans: T, LO: 3, Section: The Four Financial Statements, Subsection: Balance Sheet, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC:None, AICPA AC:
Reporting, AICPA PC: None, IMA: Reporting and Control
28. The basic accounting equation states that Assets = Liabilities.
Ans: F, LO: 3, Section: The Four Financial Statements, Subsection: Balance Sheet, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC:None, AICPA AC:
Reporting, AICPA PC: None, IMA: Reporting and Control
29. One way of stating the accounting equation is Assets + Liabilities = Stockholders‘ Equity.
Ans: F, LO: 3, Section: The Four Financial Statements, Subsection: Balance Sheet, Bloom: C, Difficulty: Medium, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA
AC: Reporting, AICPA PC: None, IMA: Reporting and Control
30. The accounting equation can be expressed as Assets - Stockholders‘ Equity = Liabilities.
Ans: T, LO: 3, Section: The Four Financial Statements, Subsection: Balance Sheet, Bloom: C, Difficulty: Easy, Minutes: 1, AACSB: Knowledge, AICPABC: None, AICPA
AC: Reporting, AICPA PC: None, IMA: Reporting and Control
31. The accounting equation can be expressed as Assets - Liabilities = Stockholders‘ Equity.
Ans: T, LO: 3, Section: The Four Financial Statements, Subsection: Balance Sheet, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC:
Reporting, AICPA PC: None, IMA: Reporting and Control
32. If the assets of a business total $150,000 and liabilities total $105,000, then itsstockholders‘ equity
totals $45,000.
Ans: T, LO: 3, Section: The Four Financial Statements, Subsection: Balance Sheet, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BC: None, AICPA AC:
Reporting, AICPA PC: None, IMA: Reporting and Control
Solution: $150,000 – $105,000 = $45,000
Total assets – Total liabilities
33. If the assets owned by a business total $100,000 and liabilities total $65,000, thenstockholders‘ equity
totals $25,000.
Ans: F, LO: 3, Section: The Four Financial Statements, Subsection: Balance Sheet, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BC: None, AICPA AC:
Reporting, AICPA PC: None, IMA: Reporting and Control
Solution: $100,000 - $65,000 = $35,000Total
assets – Total liabilities
34. Claims of creditors and owners on the assets of a business are called liabilities.
Ans: F, LO: 3, Section: The Four Financial Statements, Subsection: Balance Sheet, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC:None, AICPA AC:
Reporting, AICPA PC: None, IMA: Reporting and Control
35. Creditors‘ rights to assets supersede owners‘ rights to the assets.
Ans: T, LO: 3, Section: The Four Financial Statements, Subsection: Balance Sheet, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC:None, AICPA AC:
Reporting, AICPA PC: None, IMA: Reporting and Control
36. All publicly traded U.S. companies must provide their stockholders with an annual reporteach year.
Ans: T, LO: 3, Section: The Four Financial Statements, Subsection: Elements of an Annual Report, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge,
AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
37. Information in the notes to the financial statements has to be quantifiable (numeric).
Ans: F, LO: 3, Section: The Four Financial Statements, Subsection: Notes to the Financial Statements, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge,
AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
38. An auditor is an accounting professional who conducts an independent examination of acompany‘s
financial statements.
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use Only)
,2-6 Test Bank for Kimmel, Financial Accounting: Tools for Business Decision Making, 10e
Ans: T, LO: 3, Section: The Four Financial Statements, Subsection: Auditor‘s Report, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC:
Reporting, AICPA PC: Professional Demeanor, IMA: Reporting and Control
39. The auditor‘s report states the auditor‘s opinion as to the fairness of the presentation of the
financial position and results of operations and their conformance with generally accepted accounting
principles.
Ans: T, LO: 3, Section: The Four Financial Statements, Subsection: Auditor‘s Report, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC:
Reporting, AICPA PC: Professional Demeanor, IMA: Reporting and Control
40. The management discussion and analysis (MD&A) section of an annual report covers various financial
aspects of a company.
Ans: T, LO: 3, Section: The Four Financial Statements, Subsection: Management Discussion and Analysis, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA
BC: None, AICPA AC: Reporting, AICPA PC: Communication, IMA: Reporting and Control
41. Explanatory notes and supporting schedules are an optional part of an annual report.
Ans: F, LO: 3, Section: The Four Financial Statements, Subsection: Elements of an Annual Report, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA
BC: None, AICPA AC: Reporting, AICPA PC: Communication, IMA: Reporting and Control
42. Examples of notes are descriptions of the significant accounting policies and methods used in
preparing the statements, explanations of contingencies, and various statistics.
Ans: T, LO: 3, Section: The Four Financial Statements, Subsection: Notes to the Financial Statements Bloom: C, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA
BC: None, AICPA AC: Reporting, AICPA PC: Communication, IMA: Reporting and Control
43. The demand for accountants was increased by passage of the Sarbanes-Oxley Act (SOX) which
significantly increased the accounting and internal control requirements for corporations.
Ans: T, LO: 4, Section: Career Opportunities in Accounting, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA BC: None, AICPA AC: Reporting,
AICPA PC: Communication, IMA: Reporting and Control
MULTIPLE CHOICE QUESTIONS
44. The sole 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.
Ans: B, LO: 1, Section: Business Organization and Accounting Information Uses, Subsection: Sole Proprietorship, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge,
AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
45. 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.
Ans: C, LO: 1, Section: Business Organization and Accounting Information Uses, Subsection: Corporation, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge, AICPA
BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
46. 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.
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use Only)
, A Further Look at Financial Statements 2-7
Ans: B, LO: 1, Section: Business Organization and Accounting Information Uses, Subsection: Partnership, Bloom: K, Difficulty: Easy, Min: 1, AACSB:Knowledge, AICPA
BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
47. Which of the following is not one of the three forms of business organization?
a. Corporation
b. Partnership
c. Proprietorship
d. Investors
Ans: D, LO: 1, Section: Business Organization and Accounting Information Uses, Subsection: Forms of Business Organization, Bl oom: K, Difficulty: Easy, Min: 1, AACSB:
Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
48. The main forms of business organizations include all of the following except
a. limited liability corporation.
b. partnership.
c. sole proprietorship.
d. corporation.
Ans: A, LO: 1, Section: Business Organization and Accounting Information Uses, Subsection: Forms of Business Organization, Bloom: K, Difficulty: Easy, Min: 1, AACSB:
Knowledge, AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
49. Most business enterprises in the United States are
a. proprietorships and partnerships.
b. partnerships.
c. corporations.
d. government units.
Ans: A, LO: 1, Section: Business Organization and Accounting Information Uses, Subsection: Sole Proprietorship, Bloom: K, Difficulty: Easy, Min: 1,AACSB: Knowledge,
AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
50. A business organized as a separate legal entity is a
a. corporation.
b. proprietor.
c. government unit.
d. partnership.
Ans: A, LO: 1, Section: Business Organization and Accounting Information Uses, Subsection: Corporation, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Knowledge,
AICPA BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
51. Which of the following is not an advantage of the corporate form of businessorganization?
a. No personal liability
b. Easy to transfer ownership
c. Favorable tax treatment
d. Easy to raise funds
Ans: C, LO: 1, Section: Business Organization and Accounting Information Uses, Subsection: Corporation, Bloom: K, Difficulty: Easy, Min: 1, AACSB:Knowledge, AICPA
BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
52. 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.
Ans: C, LO: 1, Section: Business Organization and Accounting Information Uses, Subsection: Corporation, Bloom: K, Difficulty: Easy, Min: 1, AACSB:Knowledge, AICPA
BC: None, AICPA AC: Reporting, AICPA PC: None, IMA: Reporting and Control
Copyright © 2022 John Wiley & Sons, Inc. (For Instructor Use Only)
