Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: Communications, IMA: Reporting
40. Examples of notes are descriptions of the significant accounting policies and methods used in preparing the statements, explanations of contingencies, and various statistics.
Ans: T, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: Communications, IMA: Reporting
Answers to True-False Statements
1.
F
9.
T
17.
F
25.
T
33.
F
2.
T
10.
T
18.
T
26.
T
34.
T
3.
T
11.
T
19.
F
27.
F
35.
T
4.
F
12.
T
20.
F
28.
F
36.
F
5.
F
13.
F
21.
F
29.
T
37.
T
6.
F
14.
F
22.
F
30.
T
38.
T
7.
F
15.
T
23.
F
31.
T
39.
F
8.
F
16.
F
24.
F
32.
F
40.
T
MULTIPLE CHOICE QUESTIONS
41. The proprietorship form of business organization
a. must have at least two owners in most states.
b. generally receives favorable tax treatment relative to a corporation.
c. combines the records of the business with the personal records of the owner.
d. is classified as a separate legal entity.
Ans: B, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
42. 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.
Ans: C, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
43. The partnership form of business organization
a. is a separate legal entity.
b. is a common form of organization for service-type businesses.
c. enjoys an unlimited life.
d. has limited liability.
Ans: B, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
44. Which of the following is not one of the three forms of business organization?
a. Corporations
b. Partnerships
c. Proprietorships
d. Investors
Ans: D, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
45. Most business enterprises in the United States are
a. proprietorships and partnerships.
b. partnerships.
c. corporations.
d. government units.
Ans: A, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
46. A business organized as a separate legal entity is a
a. corporation.
b. proprietor.
c. government unit.
d. partnership.
Ans: A, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
47. Which of the following is not an advantage of the corporate form of business organization?
a. No personal liability
b. Easy to transfer ownership
c. Favorable tax treatment
d. Easy to raise funds
Ans: C, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA: Business Economics
48. An advantage of the corporate form of business is that
a. it has limited life.
b. its owner’s personal resources are at stake.