Test Bank for Survey of Accounting 6th Edition
Multiple Choice Questions
Who has the first preference to assets in case a business fails?
1.

Stockholders

2.

Long-term creditors

3.

Customers

4.

Employees

Debts owed by a business are referred to as:
1.

accounts receivable.

2.

equities.

3.

stockholders’ equity.

2.

Assets = Liabilities + Stockholders’ equity

3.

Assets = Liabilities

4.

Assets = Liabilities + Retained earnings

The resources a business owns are called:
1.

assets.

2.

liabilities.

3.

earnings.

4.

stockholders' equity.

Rights to payments from customers are:

4.

dividend.

________ is an example of internal stakeholders.
1.

Managers

2.

Creditors

3.

Stockholders

4.

Suppliers

Under a premium-price emphasis, a business designs products that possess
_____ for which customers are willing to pay a premium price.
1.

unique attributes

2.

high costs

Income statement


2.

Balance sheet

3.

Statement of cash flows

4.

Retained earnings statement

Which of the following is true in regards to a limited liability company?
1.

It is organized as a corporation.

2.

It can elect to be taxed as a partnership.

3.

It provides tax and liability advantages to the owners.

4.


Ownership is divided into shares of stock.


3.

Corporations experience an ease in obtaining large amounts of resources by issuing
stock.

4.

A corporation can elect to be taxed as a partnership.

Managers are evaluated primarily on the business's:
1.

tax collections.

2.

growth.

3.

economic performance.

4.

all of these.

When a business borrows money, it incurs a(n):


4.

financial accounting.


A summary of changes in the earnings retained by the corporation for a
specific period of time is known as a(n):
1.

income statement.

2.

balance sheet.

3.

statement of cash flows.

4.

retained earnings statement.

Browning, Inc. had revenues of $234,000, expenses of $175,000, and
dividends of $30,000 during 2012. Which of the following statements is
correct?
1.

Net income for 2012 totaled $29,000.

Which of the following would not be an example of a merchandising
business?
1.

The Walt Disney Company


2.

JCPenney

3.

Amazon.com

4.

Wal-Mart

Capital market stakeholders have an interest in the company because:
1.

they provide incentives for the company to market their products.

2.

they are part of the Marketing Department that is responsible for promoting the
products or services to increase the business profits.

3.

1.

$84,100

2.

$59,700


3.

$46,250

4.

$39,700

A low-cost emphasis strives to provide:
1.

no-frills, standardized products and services.

2.

products and services that provide unique market needs.

3.

products and services that provide prestige and image for customers.


Outreach emphasis

3.

Customer emphasis

4.

Premium-price emphasis


A summary of revenue and expenses for a specific period of time is a(n):
1.

income statement.

2.

balance sheet.

3.

statement of cash flows.

4.

retained earnings statement.

When a product is sold, the cost of the product sold is often called:
1.

Southwest Airlines providing standardized services

Cash collected from sales during the normal course of business would be an
example of which type of business activity?
1.

Operating

2.

Investing

3.

Financing


4.

None of these

An entity that is organized according to state or federal statutes and in which
ownership is divided into shares of stock is a:
1.

proprietorship.

2.

corporation.

Patent

2.

Cash

3.

Land

4.

Equipment


During 2012, Smith Corporation had an increase in total assets of $70,000 and
an increase in total liabilities of $90,000. Assuming that capital stock
increased by $5,000 and no dividends were paid, calculate Smith’s net income
or net loss for 2012.
1.

Net loss of $15,000

2.

Net loss of $20,000

3.

Net loss of $25,000


3.

Page 5 of14

4.

Products

5.

Stockholders’ Equity

Costs incurred in operating a business are also known as:
1.

revenues.


2.

expenses.

3.

liabilities.

4.

dividends.


operating activities section.

4.

supplemental statement.

What is the primary objective of most businesses?
1.

To maximize profits

2.

To pay dividends to stockholders

3.

To provide a benefit to society

4.

To manufacture a quality product


A list of assets, liabilities, and owners' equity as of a specific date is a(n):
1.

income statement.



Which of the items below is not a business organization form?
1.

Venture entrepreneurship

2.

Proprietorship

3.

Partnership

4.

Corporation

A summary of the cash receipts and cash payments for a specific period of
time is a(n):
1.

income statement.

2.

balance sheet.


3.


customers

3.

business incentives

4.

funds

Which of the following types of business is popular for its ease and low cost
of organizing?
1.

Not-for-profit

2.

Corporation

3.

Partnership

4.

Proprietorship

Which of the following are business stakeholders?

4.

retained earnings.

True False Questions
Accounting is thought to be the "language of business" because business
information is communicated to stakeholders.
1.

True

2.

False

The stockholders’ equity of a company should equal the sum of its total
assets and total liabilities.
1.

True

2.

False


Merchandising businesses produce products rather than provide services to
customers.
1.


1.

True

2.

False

Assets are acquired through investing activities when resources are
purchased.
1.

True

2.

False


A liability is a legal obligation to repay the amount borrowed according to the
terms of the borrowing agreement.
1.

True

2.

False

All merchandising businesses are organized as corporations.


True

2.

False

A business stakeholder has an interest in the economic performance of a
business.
1.

True


2.

False

The objective of most businesses is to maximize profits.
1.

True

2.

False

The basic type of stock issued to owners is called common stock.
1.



2.

False

The popularity of the sole proprietorship is due to the ease and low cost of
organizing.
1.

True


2.

False

Creditors have preference to assets behind stockholders if a business fails.
1.

True

2.

False

Stockholders of a corporation are its internal stakeholders.
1.

True



Business stakeholders are persons or entities that have an interest in the economic
performance of a company. (1) Capital market stakeholder; (2) Product or service
market stakeholder; (3) Government stakeholder; (4) Internal stakeholder

Define accounting and its role in business.
Answer Given

Accounting provides information for managers that can be used in operations of a
business. Accounting provides information to external stakeholders to use in
assessing the economic performance and condition of the business.

What is the basic accounting equation, and which financial statement is
prepared from this equation?
Answer Given

Assets = Liabilities + Stockholders' Equity; the balance sheet is prepared from this
equation.