ACC 300 Final Exam
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The response to each question or statement is either True or False. 1. A business organized as a separate legal entity owned by stockholders is a partnership. 2. External users of accounting information are managers who plan, organize, and run a business. 3. Two primary external users of accounting information are investors and creditors. 4. Financing activities for corporations include borrowing money and selling shares of their own stock. 5. Income will always be greater under the cash basis of accounting than under the accrual basis of accounting. 6. The difference between unearned revenue and accrued revenue is that accrued revenue has been recorded and needs adjusting and unearned revenue has never been recorded. 7. Cash is a temporary account.
8. Bonding means insuring a company against theft by employees. 9. The treasurer should prepare and sign a check only after authorization to issue a check has been provided. 10. Using borrowed money to increase the rate of return on common stockholders' equity is called "trading on the equity."The extent of internal control features adopted by a company must be evaluated in terms of cost-benefit. 11. A good system of internal control will safeguard its assets and enhance the accuracy and reliability of its accounting records. 12. All reconciling items in determining the adjusted cash balance per books require the depositor to make adjusting journal entries to the Cash account. 13. Cash equivalents include money market accounts, commercial paper, and U.S. treasury bills held for ninety days or less. 14. A basic principle of cash management is to increase the speed of paying liabilities. 15. A cash budget contributes to more effective cash management. 16. A change in accounting principle occurs when the principle used in the current year is different from the one used by competitors in the current year. 17. If a company has sales of $110 in 2007 and $154 in 2006, the percentage decrease in sales from 2006 to 2007 is 140%. 18. In a common size income statement, each item is expressed as a percentage of net income. 19. Profitability ratios are frequently used as a basis for evaluating management's operating effectiveness 20. Inventory turnover is a measure of liquidity that focuses on efficient use of inventory. 21. The current ratio is a measure of all the ratios calculated for the current year. 22. From a creditor's point of view, the higher the total debt to total assets ratio, the lower the risk that the company may be unable to pay its obligations. 23. Alternative accounting methods affect the quality of earnings 24. Because pro forma earnings are based on specific rules, these amounts are highly reliable.
Section II: Multiple Choice
Choose your response from one of the possible answers provided. 26. A business organized as a corporation
a).is not a separate legal entity in most states.
b).requires that stockholders be personally liable for the debts of the business. c).is owned by its stockholders.
d).has tax advantages over a proprietorship or partnership.
27.Which of the following is not one of the three forms of business organization? a).corporations.
28.An advantage of the corporate form of business is that
a).it has limited life.
b).its owner’s personal resources are at stake.
c).its ownership is easily transferable via the sale of shares of stock. d).it is simple to establish.
29.The group of users of accounting information charged with achieving the goals of the business is its a).auditors.
30.Which of the following is a primary user of accounting information with a direct financial interest in the business? a).Taxing authority
c). Regulatory agency
31. An income statement...
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