Financial Accounting 9th Edition by Miller-Nobles Test bank

Caleb Brown has been the sole owner of a bicycle sales and repair shop for many years. Which of the following business types would best protect Caleb's personal assets from product liability exposure?

1. Not-for-profit
2. Partnership
3. Limited liability company
4. Proprietorship

Answer: C
Difficulty: Moderate
AACSB: Analytical Thinking
Learning Objective: 7 Identify the three main types of business organisation
A-Head: What are the main types of business organisation?

95. Which of the following is NOT a characteristic of a traditional partnership?

1. A partnership is owned by shareholders.
2. A partnership joins two or more individuals as co-owners.
3. Each partner has the authority to commit the entire partnership to a binding contract.
4. If a partnership cannot pay its debts, lenders can take the owners' personal assets to satisfy the obligations.

Answer: A
Difficulty: Basic
AACSB: Analytical Thinking, Reflective Thinking
Learning Objective: 7 Identify the three main types of business organisation
A-Head: What are the main types of business organisation?

96. Which of the following is TRUE for a proprietorship?

1. A proprietorship has a single owner.
2. A proprietorship joins two or more individuals as co-owners.
3. The proprietor is not personally liable for the debts of the proprietorship.
4. A proprietorship has an indefinite life.

Answer: A
Difficulty: Basic
AACSB: Analytical Thinking, Reflective Thinking
Learning Objective: 7 Identify the three main types of business organisation
A-Head: What are the main types of business organisation?

97. A company possesses all but one of the following characteristics. Which of the following is NOT a characteristic of a company?

1. A company is a distinct entity in the eyes of the law.
2. If a company cannot pay its debts, lenders can take the owners' personal assets to satisfy the obligations.
3. A company is owned by shareholders.
4. Company ownership is divided into shares.

Answer: B
Difficulty: Basic
AACSB: Analytical Thinking, Reflective Thinking
Learning Objective: 7 Identify the three main types of business organisation
A-Head: What are the main types of business organisation?

True/False: Write 'T' if the statement is true and 'F' if the statement is false.

98. Similar to partnerships, in a limited-liability company, the members are personally liable for the debts and obligations of the business.

1. True
2. False

Answer: False
Difficulty: Basic
AACSB: Analytical Thinking, Reflective Thinking
Learning Objective: 7 Identify the three main types of business organisation
A-Head: What are the main types of business organisation?

99. A proprietor has unlimited liability for the debts and obligations of the proprietorship.

1. True
2. False

Answer: True
Difficulty: Basic
AACSB: Analytical Thinking, Reflective Thinking
Learning Objective: 7 Identify the three main types of business organisation
A-Head: What are the main types of business organisation?

100. In a limited liability company the business, not the owners, is responsible for the company's debts.

1. True
2. False

Answer: True
Difficulty: Basic
AACSB: Analytical Thinking, Reflective Thinking
Learning Objective: 7 Identify the three main types of business organisation
A-Head: What are the main types of business organisation?

Short answer: Write the word or phrase that best completes each statement or answers the question.

101. From a legal perspective, what is a proprietorship?

Answer: From a legal perspective, a proprietorship is an entity that is not distinct from its proprietor.
Difficulty: Moderate
AACSB: Analytical Thinking, Reflective Thinking