Question 1

Describe sole proprietorships, partnerships and corporations, indicating advantages and disadvantages of each form of organization.

Accepted Answer

a. Sole proprietorships are owned by one person and usually are fairly small. The owner is personally accountable for actions taken in the name of the business. One advantage of the proprietorship is ease of formation.
b. A partnership has the benefit of two or more people joining together to share their talents, their capital and the risks of business. Like proprietorships, the owners of partnerships are personally accountable for the actions taken in the name of the business. A partner is often responsible for the actions of the other partners as well.
c. Unlike proprietorships and partnerships, a corporation is designated as a separate legal entity by the state in which it is incorporated. The corporate form allows the potential of obtaining larger sums of capital than other forms. Other advantages of the corporate form are limited liability for stockholders, continuity of existence, transferability of ownership and professional management. Disadvantages include double taxation, more governmental regulation, and greater complexity of formation.

Question 2

Ease of transferability of ownership is one of the important advantages of the corporate form of business organization.

Accepted Answer

A) True 
 B)False  True

Question 3

On January 1, 2012, the organizers of the Parsons Corporation obtained their charter and issued 10,000 shares of $1 par common stock for $4 per share. During 2012, the corporation earned $30,000 in cash revenue and paid $20,000 in cash expenses, not including income tax. The income tax rate was 30%, and the company's income tax expense was $3,000. The company declared and paid cash dividends totaling $2,000. Using the above information, prepare an income statement and a balance sheet for the Parsons Corporation.

Accepted Answer

The answer of On January 1, 2012, the organizers of...

Question 4

Gruening Company declared and paid a cash dividend. Which of the following choices accurately reflects how this event would affect the company's financial statements?

Accepted Answer

A)  Choice A 
B)  Choice B 
C)  Choice C 
D)  Choice D 
A)  Choice A 
B)  Choice B 
C)  Choice C 
D)  Choice D

Question 5

A partner is responsible for (liable for) his/her own actions and also for actions taken by another partner on behalf of the partnership.

Accepted Answer

A) True 
 B)False

Question 6

On January 2, 2014, the Hoover Corporation issued 25,000 shares of $10 stated-value common stock for $24 per share. Which of the following statements is true?

Accepted Answer

A)  The Paid-in Capital in Excess of Stated Value account will increase by $350,000. 
B)  The Cash account will increase by $500,000. 
C)  The Stock Payable account will increase by $600,000. 
D)  The Common Stock account will increase by $600,000. 
A)  The Paid-in Capital in Excess of Stated Value account will increase by $350,000. 
B)  The Cash account will increase by $500,000. 
C)  The Stock Payable account will increase by $600,000. 
D)  The Common Stock account will increase by $600,000.

Question 7

The declaration of a cash dividend will

Accepted Answer

A)  decrease assets and equity. 
B)  increase liabilities and decrease equity. 
C)  decrease liabilities and increase equity. 
D)  increase assets and liabilities. 
A)  decrease assets and equity. 
B)  increase liabilities and decrease equity. 
C)  decrease liabilities and increase equity. 
D)  increase assets and liabilities.

Question 8

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. $$\text { Increase } = \mathrm { I } \quad \text { Decrease } = \mathrm { D } \quad \text { No Effect } = \mathrm { N }$$ 
Susan Englert began her sole proprietorship on January 7, 2014 by contributing $10,000 cash to the business. Indicate the effects of this transaction on the business's financial statements. $\begin{array}{|l|l|l|l|l|l|}
\text { Assets Liabilities } & \text { Equity } & \text { Revenues } & \text { Expenses } & \begin{array}{c}
\text { Net } \
\text { Income }
\end{array} & \begin{array}{c}
\text { Cash } \
\text { Flow }
\end{array}\\hline&&&
\end{array}$

Accepted Answer

The answer of Indicate how each event affects the elements...

Question 9

All corporations are subject to extensive government regulation.

Accepted Answer

A) True 
 B)False

Question 10

What kind of transaction is the declaration of a stock dividend?

Accepted Answer

A)  asset source transaction 
B)  claims exchange transaction 
C)  asset use transaction 
D)  asset exchange transaction 
A)  asset source transaction 
B)  claims exchange transaction 
C)  asset use transaction 
D)  asset exchange transaction

Question 11

A 10% preferred stock dividend is declared. The declaration and subsequent issuance do/does

Accepted Answer

A)  not affect total equity. 
B)  increase retained earnings. 
C)  decrease total paid-in capital. 
D)  decrease net income. 
A)  not affect total equity. 
B)  increase retained earnings. 
C)  decrease total paid-in capital. 
D)  decrease net income.

Question 12

Explain how the equity section of a balance sheet differs among sole proprietorships, partnerships and corporations.

Accepted Answer

a) The equity section of a proprietorshi

Question 13

When the Common Stock account is disclosed on the balance sheet, it is reported at the ________ of the common stock.

Accepted Answer

A)  current market value 
B)  most recent issue price 
C)  lower of cost or market 
D)  par or stated value 
A)  current market value 
B)  most recent issue price 
C)  lower of cost or market 
D)  par or stated value

Question 14

On September 11, 2014, the Hafar Corporation has unrestricted Retained Earnings of $6,000,000, Appropriated Retained Earnings of $4,000,000, Cash of $7,500,000, and Accounts Payable of $500,000. What is the maximum amount that the corporation could use for cash dividends on that date?

Accepted Answer

A)  $7,500,000 
B)  $7,000,000 
C)  $6,000,000 
D)  $5,500,000 
A)  $7,500,000 
B)  $7,000,000 
C)  $6,000,000 
D)  $5,500,000

Question 15

On March 1, 2014 Garrison, Incorporated declared the annual cash dividend on its 1,500 outstanding shares of $5 par value, 5% noncumulative preferred stock. The dividend will be paid on May 1, 2014, to the stockholders of record as of April 1, 2014.
What effect will the declaration of the dividend have on Garrison's financial statements?

Accepted Answer

A)  Choice A 
B)  Choice B 
C)  Choice C 
D)  Choice D 
A)  Choice A 
B)  Choice B 
C)  Choice C 
D)  Choice D

Question 16

At the end of the accounting period, Isaac Company had a balance of $4,000 in its common stock account, additional paid in capital of $4,000, retained earnings of $3,000, and $1,000 of treasury stock. The total amount of stockholders' equity is:

Accepted Answer

A)  $10,000. 
B)  $13,000. 
C)  $12,000. 
D)  $8,000. 
A)  $10,000. 
B)  $13,000. 
C)  $12,000. 
D)  $8,000.

Question 17

Indicate whether each of the following statements is true or false.
1. Limited liability is an advantage of both corporations and partnerships but not sole proprietorships
2. Unlike a partnership, a corporation is not terminated when a major stockholder withdraws his or her investment
3. Corporations are subject to more governmental regulations than sole proprietorships
4. Double taxation refers to the fact that corporations have to pay both federal and state income taxes
5. A corporation is a legal entity separate from its owners

Accepted Answer

1. False
2

Question 18

According to some studies, the Sarbanes-Oxley Act of 2002 has had a negative effect on some public companies. Describe the negative result.

Accepted Answer

Due to the increased cost of regulatory

Question 19

Purchase of treasury stock would be shown on the statement of cash flows as

Accepted Answer

A)  an operating activity. 
B)  an investing activity. 
C)  a financing activity. 
D)  none of these. 
A)  an operating activity. 
B)  an investing activity. 
C)  a financing activity. 
D)  none of these.

Question 20

Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. $$\text { Increase } = \mathrm { I } \quad \text { Decrease } = \mathrm { D } \quad \text { No Effect } = \mathrm { N }$$ 
Sanders Co. issued 10,000 shares of common stock for $35 per share. The stock has a par value of $10. $\begin{array}{|l|l|l|l|l|l|}
\text { Assets Liabilities } & \text { Equity } & \text { Revenues } & \text { Expenses } & \begin{array}{c}
\text { Net } \
\text { Income }
\end{array} & \begin{array}{c}
\text { Cash } \
\text { Flow }
\end{array}\\hline&&&
\end{array}$

Accepted Answer

The answer of Indicate how each event affects the elements...

Describe sole proprietorships, partnerships and corporations, indicating advantages and disadvantages of each form of organization.

Ease of transferability of ownership is one of the important advantages of the corporate form of business organization.

Gruening Company declared and paid a cash dividend. Which of the following choices accurately reflects how this event would affect the company's financial statements?

A partner is responsible for (liable for) his/her own actions and also for actions taken by another partner on behalf of the partnership.

On January 2, 2014, the Hoover Corporation issued 25,000 shares of $10 stated-value common stock for $24 per share. Which of the following statements is true?

The declaration of a cash dividend will

All corporations are subject to extensive government regulation.

What kind of transaction is the declaration of a stock dividend?

A 10% preferred stock dividend is declared. The declaration and subsequent issuance do/does

Explain how the equity section of a balance sheet differs among sole proprietorships, partnerships and corporations.

When the Common Stock account is disclosed on the balance sheet, it is reported at the ________ of the common stock.

On September 11, 2014, the Hafar Corporation has unrestricted Retained Earnings of $6,000,000, Appropriated Retained Earnings of $4,000,000, Cash of $7,500,000, and Accounts Payable of $500,000. What is the maximum amount that the corporation could use for cash dividends on that date?

At the end of the accounting period, Isaac Company had a balance of $4,000 in its common stock account, additional paid in capital of $4,000, retained earnings of $3,000, and $1,000 of treasury stock. The total amount of stockholders' equity is:

According to some studies, the Sarbanes-Oxley Act of 2002 has had a negative effect on some public companies. Describe the negative result.

Purchase of treasury stock would be shown on the statement of cash flows as

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Internal Controls, Accounting for Cash, and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Financial Statement Analysis

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation, Tracing, and Allocation

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

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Exam 8: Proprietorships, Partnerships, and Corporations

Describe sole proprietorships, partnerships and corporations, indicating advantages and disadvantages of each form of organization.

Ease of transferability of ownership is one of the important advantages of the corporate form of business organization.

Gruening Company declared and paid a cash dividend. Which of the following choices accurately reflects how this event would affect the company's financial statements?

A partner is responsible for (liable for) his/her own actions and also for actions taken by another partner on behalf of the partnership.

On January 2, 2014, the Hoover Corporation issued 25,000 shares of $10 stated-value common stock for $24 per share. Which of the following statements is true?

The declaration of a cash dividend will

All corporations are subject to extensive government regulation.

What kind of transaction is the declaration of a stock dividend?

A 10% preferred stock dividend is declared. The declaration and subsequent issuance do/does

Explain how the equity section of a balance sheet differs among sole proprietorships, partnerships and corporations.

When the Common Stock account is disclosed on the balance sheet, it is reported at the ________ of the common stock.

On September 11, 2014, the Hafar Corporation has unrestricted Retained Earnings of $6,000,000, Appropriated Retained Earnings of $4,000,000, Cash of $7,500,000, and Accounts Payable of $500,000. What is the maximum amount that the corporation could use for cash dividends on that date?

At the end of the accounting period, Isaac Company had a balance of $4,000 in its common stock account, additional paid in capital of $4,000, retained earnings of $3,000, and $1,000 of treasury stock. The total amount of stockholders' equity is:

According to some studies, the Sarbanes-Oxley Act of 2002 has had a negative effect on some public companies. Describe the negative result.

Purchase of treasury stock would be shown on the statement of cash flows as

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Internal Controls, Accounting for Cash, and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Financial Statement Analysis

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation, Tracing, and Allocation

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

Filters