1. The proprietorship form of business organization a. must have at least two ow
ID: 2540809 • Letter: 1
Question
1. 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. 2. A business organized as a corporation is not a separate legal entity in most states. a. b. requires that stockholders be personally liable for the debts of the business. is owned by its stockholders. d. c. has tax advanta ges over a proprietorship or partnership 3. Which of the following statements is not true regarding the Sarbanes-Oxley Act (SOX)? a. The Act calls for increased oversight responsibilities for boards of directors. b. The Act has resulted in increased penalties for financial fraud by top management. c. The Act calls for decreased independence of outside auditors reviewing corporate financial d. The Act is meant to decrease the likelihood of unethical corporate behavior. 4. Which of the following groups uses accounting information primarily to insure the entity is operating within prescribed rules? a. Taxing authorities b. Regulatory agencies c. Labor Unions d. Management 5. The right to receive money in the future is called a(n) a account payable b. account receivable. d. revenue 6. Issuing shares of stock in exchange for cash is an example of a(n) a. delivering activity b. investing activity. c. financing activity d. operating activity. 7. Jackson Company recorded the following cash transactions for the year: Paid $135,000 for salaries. Paid $60,000 to purchase office equipment. Paid $15,000 for utilities. Paid $6,000 in dividends. Collected $245,000 from customers. What was Jackson's net cash provided by operating activities? a. $95,000 b. $35,000 c. $110,000 d. $89,000Explanation / Answer
Solution:
1. Option C ( Combines the records of the business with the personal records of the owners )
Explanation: In case of sole trade business, there is no difference between the owner and the business.
2. Option C ( Is owned by its stockholders)
Explanation: In the case of a corporation, it is owned by the stockholders i.e. they are the real owners who have contributed the capital and it is managed by the employees.
3. Option C ( The act called for decreased independence for outside auditors reviewing corporate financial statements)
Explanation: Decreasing the independence is a violation of the element of objectivity in auditing. The act is meant for ethical execution not unethical.
4. Option B ( Regulatory agencies)
Explanation: Regulatory agencies provides rules, regulations, and provisions as well as examine whether the company has made and presented the financial information as per rules or not.
5. Option B ( Account receivables)
Explanation: Right to receive money for goods and services from the party made them your debtors or account receivables.
Q6: Option C ( Financing Activity)
Explanation: Issuing shares is a financial activity to raise capital from the market.
Q7: Option C ( $110000)
Explanation: Only two items belong to operating activities i.e. salary and customer collection. Therefore, Collection from the customer is cash inflow from operating activity and salaries paid is cash outflow from operating activities. ( $245000 - $ 135000 ) = $110000
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