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1 Copyright © 2017 Pearson Education, Inc.Financial Accounting, 11e (Harrison/Horngren/Thomas) Chapter 1 The Financial Statements
- Learning Objective 1-1
1) Accounting is an information system that measures business activities.
Answer: TRUE
Diff: 1 Var: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement
2) Bookkeeping is a mechanical part of accounting.
Answer: TRUE
Diff: 1 Var: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement
3) Accounting is often called the language of business.
Answer: TRUE
Diff: 1 Var: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement
4) Accounting produces financial statements, which report information about a business.
Answer: TRUE
Diff: 1 Var: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement, Reporting
5) The accounting process begins and ends with people making decisions.
Answer: TRUE
Diff: 1 Var: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement
Financial Accounting 11e Harrison Horngren Thomas Tietz (Test Bank All Chapters, 100% Original Verified, A+ Grade) 1 / 4
2 Copyright © 2017 Pearson Education, Inc.6) Accounting information is used by investors and creditors, but not by regulatory bodies.
Answer: FALSE
Diff: 1 Var: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Bus Persp: Industry Sector, Legal/Regulatory
AICPA Functional: Measurement, Reporting
7) Since Habitat for Humanity is not concerned about making a profit, the entity does not need to use accounting information.
Answer: FALSE
Diff: 1 Var: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Bus Persp: Industry Sector, Legal/Regulatory
AICPA Functional: Measurement, Reporting
8) The business records of a sole proprietorship should include the proprietor's personal finances.
Answer: FALSE
Diff: 1 Var: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement
9) A partnership is a taxpaying entity.
Answer: FALSE
Diff: 1 Var: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement
10) Stockholders have no personal obligation for the corporation's debts.
Answer: TRUE
Diff: 1 Var: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement
11) Accounting:
- measures business activities.
- processes data into reports and communicates the data to decision makers.
- is often called the language of business.
- is all of the above.
Answer: D
Diff: 2 Var: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement, Reporting 2 / 4
3 Copyright © 2017 Pearson Education, Inc.
12) A disadvantage of general partnerships is:
- double taxation of distributed profits.
- the partnership's assets are commingled with each partner's personal assets.
- only individuals can be partners.
- each partner may conduct business in the name of the entity and make agreements that legally bind
all partners.
Answer: D
Diff: 2 Var: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement
13) Which of the following statements is TRUE for a limited liability company?
- Members have unlimited liability for the debts of the business.
- Members are not personally liable for the debts of the business.
- Only the limited partners have limited liability for the debts of the business.
- Members are not taxed like members of a partnership.
Answer: B
Diff: 2 Var: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement
14) Which of the following statements is TRUE for a limited liability partnership?
- The partners all have limited liability for the debts of the partnership.
- The partners all have limited liability for the acts of the other partners.
- The general partner has unlimited liability for the debts of the partnership.
- The limited partners have unlimited liability for the debts of the partnership.
Answer: C
Diff: 2 Var: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement
15) Which of the following statements is TRUE for a proprietorship?
- Legally, a proprietorship is separate from the proprietor.
- For accounting purposes, a proprietorship is separate from the proprietor.
- The business records include the proprietor's personal finances.
- All statements are correct.
Answer: B
Diff: 2 Var: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement 3 / 4
4 Copyright © 2017 Pearson Education, Inc.16) Federal income taxes are paid by ________ in a limited liability company.
- the company
- limited partners only
- general partners only
- members
Answer: D
Diff: 2 Var: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement, Reporting
17) Which of the following statements is TRUE for a limited liability partnership?
- The partnership pays no federal income taxes.
- Only the limited partners pay federal income taxes on their shares of the partnership's profits.
- Only the general partner pays federal income taxes on his or her share of the partnership's profits.
- Only the members pay federal income taxes on their shares of the partnership's profits.
Answer: A
Diff: 2 Var: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement, Reporting
18) Which statement is TRUE about partnerships?
- A partnership is a taxpaying entity.
- General partnerships have mutual agency and limited liability.
- Individuals, corporations, partnerships, or other types of entities can be partners.
- A written partnership contract must exist.
Answer: C
Diff: 2 Var: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement
19) Which of the following have unlimited liability for a company's debts?
- owners of a corporation
- members of a limited liability company
- limited partners in a limited liability partnership
- general partner in a limited liability partnership
Answer: D
Diff: 2 Var: 1
LO: 1-1
AACSB: Reflective Thinking
AICPA Bus Persp: Legal/Regulatory
AICPA Functional: Measurement
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