ACC 100 Chapter Notes - Chapter 1: Financial Statement, Management Accounting, Retained Earnings

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19 Oct 2014

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Organization a collection of individuals pursuing the same goal or objective. Business entity organization which exists to earn an income. Sole proprietorship (business entity) a business with a single owner. Economic entity concept the assumption that a single, identifiable unit must be accounted for in all situations. i. e. personal costs of a business owner must be separated from the costs of the business. Partnership (business entity) a business owned by two or more individuals and with the characteristic of unlimited liability. Corporation (business entity) - a form of entity organized under the laws of a particular province or the federal government; ownership evidenced by shares. Key advantages are that a large amount of money can be raised in a short amount of time, that ownership can easily be transferred, and limited liability in owning shares. Share a certificate that acts as ownership in a corporation.

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QUESTION 1 The knowledge of financial accounting can assist people with decisions such as whether to extend credit to a business. True False 0.2 points Saved QUESTION 2 Employees of a company would not have a reason to use the information provided by financial accounting. True False 0.2 points Saved

QUESTION 3 Financial accounting should be used for assessing the financial health of large organizations only. True False 0.2 points Saved

QUESTION 4 Financial accounting can be helpful for a job candidate who is assessing the financial future of a potential employer. True False 0.2 points Saved QUESTION 5 Lenders might use the information produced by financial accounting when making loan decisions. True False 0.2 points Saved

QUESTION 6 Credit analysts prefer not to use information provided by financial accounting, as it is not accurate. True False 0.2 points Saved

QUESTION 7 Financial accounting is helpful to investment advisors. True False 0.2 points Saved

QUESTION 8 Financial accounting is more useful than managerial accounting. True False 0.2 points Saved

QUESTION 9 The decision to buy or rent equipment is an example of a decision aided by managerial accounting. True False 0.2 points Saved

QUESTION 10 Which of the following statements is true of financial accounting? A. It is used by external parties to make investment decisions. B. It is used to make lease or purchase decisions. C. Managerial accounting is another name for financial accounting, D. It is primarily used to make internal decisions of a business. E. The effectiveness of advertising can be judged using financial accounting. 0.2 points Saved QUESTION 11 The charge for using money over time, often associated with long-term loans, is known as: A. interest. B. principal. C. distribution charge. D. cash dividend. E. preferred dividend. 0.2 points Saved QUESTION 12 Which of the following is a common feature of financial and managerial accounting? A. Both have same objectives B. Both are prepared according to U.S. GAAP C. Both are reported at year end in the annual report D. Both are analyzed by external users while making investment decisions E. Both are used by the management in making decisions 0.2 points Saved

QUESTION 13 Dividends are required to be paid to stockholders on an annual basis. True False 0.2 points Saved

QUESTION 14 An individual who owns one or more shares of stock in a corporation is an owner of that corporation. True False 0.2 points Saved

QUESTION 15 Corporations do not exist as separate legal entities apart from their owners. True False 0.2 points Save Answer

QUESTION 16 It is very difficult to buy or sell ownership shares of a corporation in a stock exchange. True False 0.2 points Saved

QUESTION 17 Stock markets match up investors who wish to buy shares with those who wish to sell them. True False 0.2 points Saved

QUESTION 18 Legal process by which owners of an organization apply to a state government to have it identified as an entity legally separate from its owners is called: A. stocking. B. filling. C. attributing. D. registration. E. incorporation. 0.2 points Saved

QUESTION 19 An advantage of ownership in a sole proprietorship over ownership in a corporation is: A. tax benefits. B. having a board of directors. C. the ability to raise capital through issuance of stock. D. separation of owner and business as legal entities. E. limited liability for debts. 0.2 points Saved

QUESTION 20 Who hires the management of a corporation? A. Stockholders B. Board of directors C. Creditors D. Government E. SEC 0.2 points Saved QUESTION 21 Inventory refers to the: A. excess amount paid for an asset over its fair value. B. intangible assets of a business. C. merchandise bought or manufactured for the purpose of selling. D. amount of net income reinvested by company for future operations. E. revenue generated from investment. 0.2 points Saved QUESTION 22 Investors use financial information to predict whether a: A. company will recruit more employees. B. company's stock price will increase C. company has invested in buildings. D. company will pay salaries. E. company's bond price will increase. 0.2 points Saved

QUESTION 23 Financial accounting can be compared to a portrait. True False 0.2 points Saved

QUESTION 24 Financial statements provide the form and structure for the conveyance of financial information that will create a likeness of the reporting organization. True False 0.2 points Saved

QUESTION 25 The information reported in financial statements must be exact for an investor to make any decision. True False 0.2 points Saved

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Regulations are

	A. equal in authorityto legislation if statutory
	B. equal in authorityto legislation
	C. presumed to bevalid and to have almost the same weight as the IRC
	D. equal in authorityto legislation if interpretative

2) Which of the followingstatements regarding proposed regulations is not correct?

	A. Practitioners andother interested parties may comment on proposed regulations.
	B. Proposedregulations expire after 3 years.
	C. Proposed andtemporary regulations are generally issued simultaneously.
	D. Proposedregulations do not provide any insight into the IRS'sinterpretation of the tax law.

3) Identify which of thefollowing statements is false.

	A. Members from boththe House and the Senate are on the Conference Committee.
	B. When tax advisorsspeak of the tax law, they usually have in mind just the InternalRevenue Code.
	C. Records ofcommittee hearings are helpful in determining Congressionalintent.
	D. All arefalse.

4) Which of the followingstatements about a partnership is true?

	A. Partners are taxedon distributions from a partnership.
	B. A partnership is ataxpaying entity.
	C. Partners are taxedon their allocable share of income whether it is distributed ornot.
	D. Partners areconsidered employees of the partnership.

5) Which of the followingstatements is incorrect?

	A. The number of Scorporation shareholders is unlimited.
	B. S corporationsmust allocate income and expenses to their shareholders based ontheir proportionate ownership interest.
	C. S corporationincome is taxed to shareholders when earned.
	D. S corporationlosses can offset shareholder income from other sources.

6) Which of the followingstatements is incorrect?

	A. Limited partners'liability for partnership debt is limited to their amount ofinvestment.
	B. In a generalpartnership, all partners have unlimited liability for partnershipdebts.
	C. In a limitedpartnership, all partners participate in managerialdecision-making.
	D. All of thestatements are correct.

7) Three members form an LLC inthe current year. Which of the following statements is incorrect?

	A. The LLC can electto have its default classification ignored.
	B. The LLC's defaultclassification under the check-the-box rules is as apartnership.
	C. The LLC can electto be taxed as a C corporation with no special taxconsequences.
	D. If the LLC electsto use its default classification, it can elect to change itsstatus to being taxed as a C corporation beginning with the thirdtax year after the initial classification.

8) Identify which of thefollowing statements is false.

	A. Under thecheck-the-box regulations, an LLC that has only two members(owners) must be taxed as a partnership.
	B. The check-the-boxregulations permit an LLC to be taxed as a C corporation.
	C. A business neednot be incorporated under state or federal law to be taxed as acorporation.
	D. Once an electionis made to change its classification, an entity cannot change againfor 60 months.

9) Identify which of thefollowing statements is true.

	A. The check-the-boxregulations permit an LLC to be taxed as a C corporation.
	B. Under thecheck-the-box regulations, an LLC that has only two members(owners) default classification is as a partnership.
	C. Once an electionis made to change its classification, an entity cannot change againfor 60 months.
	D. All of thestatements are true.

10) For Sec. 351 purposes theterm property does not include

	A. accountsreceivable
	B. cash
	C. inventory
	D. servicesrendered

11) Identify which of thefollowing statements is true.

	A. The exchange ofstock for services rendered is not a taxable transaction.
	B. The repeal of Sec.351 would result in more existing businesses beingincorporated.
	C. Section 351 wasenacted to allow taxpayers to incorporate without incurring adversetax consequences.
	D. All arefalse.

12) Barry, Dan, and Edithtogether form a new corporation; Barry and Dan each contributeproperty in exchange for stock. Within 2 weeks after the formation,the corporation issues additional stock to Edith in exchange forproperty. Barry and Dan each hold 10,000 shares and Edith willreceive 9,000 shares. Which transactions will qualify fornonrecognition?

	A. Only the secondtransaction will qualify for nonrecognition.
	B. Only the firsttransaction will qualify for nonrecognition.
	C. Because of thestep transaction doctrine neither transaction will qualify.
	D. Both transactionswill qualify under Sec. 351 if they are part of the same plan ofincorporation.

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ACC 100 Chapter Notes - Chapter 1: Financial Statement, Management Accounting, Retained Earnings

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