Name: Class: Date: - Chapter 01: The Role of Accounting in Business ...

Name: Class: Date:

Chapter 01: The Role of Accounting in Business

Copyright Cengage Learning. Poweredby Cognero.Page 1 1.The objective of most businesses is to maximize profits.

• True
• False

ANSWER: True

2.A limited liability company combines attributes of a partnership and a corporation.

• True
• False

ANSWER: True

3.A partnership is owned by two or more individuals.

• True
• False

ANSWER: True

4.Manufacturing businesses change basic inputs into products that are sold to individual customers.

• True
• False

ANSWER: True

5.Merchandising businesses produce products rather than provide services to customers.

• True
• False

ANSWER: False

6.A corporation is a business that is legally separate and distinct from its owners.

• True
• False

ANSWER: True

7.The popularity of the sole proprietorship is due to the ease and low cost of organizing.

• True
• False

ANSWER: True

8.A primary disadvantage of corporations is that the financial resources available to them are limited.

• True
• False

ANSWER: False

9.The ownership of a proprietorship is divided into shares of stock owned by its stockholders.

• True
• False

ANSWER: False

Survey of Accounting, 9e Carl Warren, Amanda Farmer (Test Bank All Chapters) 1 / 4

Name:

Class:

Date:

Chapter 01: The Role of Accounting in Business

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• All merchandising businesses are organized as corporations.
• True
• False

ANSWER: False

• Stockholders of a corporation are its internal stakeholders.
• True
• False

ANSWER: False

• John Deere is a leading manufacturer of agricultural machinery in the world, producing products that serve unique

market needs. Therefore, John Deere is an example of a company that uses a premium-price emphasis to attract customers.

• True
• False

ANSWER: True

• A business stakeholder has an interest in the economic performance of a business.
• True
• False

ANSWER: True

• Companies using a low-cost emphasis provide products and services that compete on features other than price.
• True
• False

ANSWER: False

• The basic type of stock issued to owners is called common stock.
• True
• False

ANSWER: True

• Assets are acquired through investing activities when resources are purchased.
• True
• False

ANSWER: True

• Creditors have preference to assets behind stockholders if a business fails.
• True
• False

ANSWER: False

• A liability is a legal obligation to repay the amount borrowed according to the terms of the borrowing agreement.
• True
• False 2 / 4

Name:

Class:

Date:

Chapter 01: The Role of Accounting in Business

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ANSWER: True

• Accounting is thought to be the "language of business" because business information is communicated to stakeholders.
• True
• False

ANSWER: True

• The branch of accounting related to the management's financial decisions is known as financial accounting.
• True
• False

ANSWER: False

• The stockholders' equity of a company should equal the sum of its total assets and total liabilities.
• True
• False

ANSWER: False

• The balance sheet represents the accounting equation.
• True
• False

ANSWER: True

• What is the primary objective of most businesses?
• To maximize profits
• To pay dividends to stockholders
• To provide a benefit to society
• To manufacture a quality product

ANSWER: a

• Which of the following businesses buys products from other businesses wholesale to sell them to customers at a retail

price?

• A merchandising business
• A manufacturing business
• A service business
• An investment business

ANSWER: a

• Which of the items below is not a business organization form?
• Multi-venture
• Proprietorship
• Partnership
• Corporation

ANSWER: a

• Which of the following types of organizational forms is popular for its ease of formation and low cost of organizing? 3 / 4

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Chapter 01: The Role of Accounting in Business

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• Not-for-profit
• Corporation
• Partnership
• Proprietorship

ANSWER: d

• Which of the following statements is true about a limited liability company?
• It is organized under state or federal statutes as a separate legal entity.
• Many professional practices such as lawyers, doctors, and accountants are organized as limited liability

companies.

• Its financial resources are limited to the individual owner's resources.
• The frequency of this form is due to the ease and low cost of organizing.

ANSWER: b

• Under a _____, a business design's products that possess unique attributes or characteristics for which customers are

willing to pay more.

• premium-price emphasis
• outreach emphasis
• low-cost emphasis
• customer emphasis

ANSWER: a

• Which of the following is not a characteristic of a corporation?
• Corporations are organized as a separate legal taxable entity.
• Ownership is divided into shares of stock.
• Corporations experience an ease in obtaining large amounts of resources by issuing stock.
• A corporation can elect to be taxed as a partnership.

ANSWER: d

• A corporation is an entity _____.
• that is organized according to state or federal statutes and in which ownership is divided into shares of stock
• that is known for its ease of formation
• that terminates its existence with the death of the owner
• that pays tax on the owner's tax returns

ANSWER: a

• A low-cost emphasis strives to provide _____.
• no-frills, standardized products and services
• products and services that provide unique market needs
• products and services that provide prestige and image for customers
• products and services that compete on features other than price

ANSWER: a

• Which of the following businesses use a premium-price emphasis?
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