Exam 1 – Chapter 1 & 2

Which of the following is typically considered a disadvantage of sole proprietorships?

• Income taxes are paid by both the business and its owner.

• The business is considered a separate legal entity from its owner.

• Establishing the business usually requires legal assistance.

• Owner is personally liable for all debts of the business.

Managerial accounting reports prepared for internal use are used by the company's:

• suppliers.

• bank.

• employees.

• stockholders.

Expenses are:

• equal to a company's liabilities.

• always less than revenues.

• the costs of doing business that are necessary to earn revenue.

• always less than the amount of cash a company has available.

Which of the following are the three basic elements of the balance sheet?

• Assets, liabilities, and retained earnings.

• Assets, liabilities, and common stock.

• Assets, liabilities, and revenues.

• Assets, liabilities, and stockholders' equity.

The Publish or Perish Printing Company paid a dividend to stockholders. This will be reported on the:

• audit report.

• income statement.

• balance sheet.

• statement of retained earnings.

• $40,000 increase

• $40,000 decrease

• $60,000 increase

• $60,000 decrease

• $20,000

• $28,000

• $16,000

• $24,000

Net income appears on which of the following financial statements?

• A) Balance sheet and income statement

• B) Balance sheet and statement of retained earnings

• C) Balance sheet and statement of cash flows

• D) Income statement and statement of retained earnings

The creditors' claims to a company's resources are represented by:

• common stock.

• total stockholder's equity.

• total liabilities.

• retained earnings.

• $104,000

• $120,000

• $128,000

• $152,000