BAT Chapter 1 Review

Which of the following characteristics are related to corporations as opposed to partnerships and sole proprietorships?

• Simple to form, unlimited legal liability, limited life

• Limited legal liability, limited life, income taxes on profit paid by the organization

• More than one owner, income taxes on profit paid by the owners, unlimited legal liability

• Income taxes paid by the organization, limited legal liability, indefinite life

Which of the following statements about the going concern assumption is correct?

• The going concern assumption is the assumption that the economic entity will continue to operate in the future.

• Under the going concern assumption, all of the business's assets must be reported at their fair value.

• The financial statements must report whether or not a company is a going concern.

• The going concern assumption is not followed under IFRS.

Which of the following items is not reported on the statement of owner's equity?

• Investment by the owner

• Drawings

• Profit

• Revenues

As at December 31, after its first year of operations and before the closing process, Stoneland Company has assets of $8,500; revenues of $6,000; expenses of $3,500; owner's capital of $5,000; and drawings of $500. What are the liabilities for Stoneland Company as at December 31?

• $1,500

• $2,500

• $500

• $3,500

Genesis Company buys a $10,000 machine on credit. Initially, this transaction will only affect the:

• Income statement

• Balance sheet

• Income statement and Statement of owner's equity

• Income statement, statement of owner's equity, and balance sheet

Bing Company pays $700 for store rent for the month. The basic analysis of this transaction on the accounting records is:

• the asset Cash is increased by $700 and the expense Rent Expense is increased by $700

• the asset Cash is decreased by $700 and the expense Rent Expense is increased by $700

• the asset Cash is decreased by $700 and the liability Rent Payable is increased by $700

• the asset Cash is increased by $700 and the liability Rent Payable is decreased by $700

Which of the following statements about the income statement and balance sheet is correct?

• The income statement and the balance sheet both show information as at a specific point in time.

• The income statement shows information as at a specific point in time; the balance sheet shows information for a specified time period.

• The income statement and the balance sheet both show information for a specified time period.

• The income statement shows information for a specified time period; the balance sheet shows information as at a specific point in time.

An external use could be:

• employees

• management

• Canada Revenue Agency

• human resources director

The proprietorship form of business organization:

• must have at least 3 owners in most provinces

• represents the largest number of businesses in Canada

• combines the records of the business with the personal records of the owner

• is characterized by a legal distinction between the business as an economic unit and the owner

Judy and Marilyn met at law school and decide to start a small law practice after graduation. They agree to split revenues and expenses evenly. The most common form of business organization for a business such as this would be a(n):

• non-profit organization

• partnership

• corporation

• proprietorship