Which of the following statements is true of a sole proprietorship? A) A sole proprietorship joins two or more individuals as co-owners. B) The sole proprietor is personally liable for the liabilities of the business. C) A sole proprietorship is taxed separately from the owner. D) A sole proprietorship has to pay business income taxes. […]
The taxable income of a sole proprietorship is ________. A) combined with the personal income of the proprietor B) not combined with the proprietor’s personal income C) not taxable D) handled similarly to that of a corporation ANSWER A
In a limited-liability company, the ________. A) members are personally liable to pay the entity’s debts B) business pays income tax on earnings C) members are liable for each other’s actions D) members pay income tax on their share of earnings ANSWER D
Joshua Thomas Corporation manufactures and retails computer hardware. The president of the corporation bought a new car as a gift for his daughter and paid for it using cash from the business Since the corporation paid for the car, it was recorded in its books as an asset. Which of the following concepts or principles […]
Johnson Company purchased land for $30,000. The president of Johnson Company believes that the land is actually worth $35,000. The land can be recorded at $35,000. Indicate whether the statement is true or false ANSWER FALSE .The cost principle states that acquired assets are recorded at their actual cost.
The ultimate control of the corporation rests with the ________. A) board of directors B) stockholders C) chairperson D) chief operating officer ANSWER B
Since cost is a reliable measure, the cost principle holds that the accounting records should continue reporting an asset at its historical cost over its useful life. Indicate whether the statement is true or false ANSWER TRUE
According to the ________, acquired assets should be recorded at the amount actually paid rather than at the estimated market value. A) going concern assumption B) economic entity concept C) cost principle D) monetary unit assumption ANSWER C
Lorna Smith decided to start her own CPA practice as a professional corporation, Smith CPA PC. Her corporation purchased an office building for $35,000 that her real estate agent said was worth $50,000 in the current market The corporation recorded the building as a $50,000 asset because Lorna believes that is the real value of […]
Which of the following actions determines when a corporation comes into existence? A) The charter is obtained from the state. B) The incorporators pay fees, sign the charter, and file required documents with the state. C) The first share of stock is issued. D) The corporate bylaws are written. ANSWER C
