BUS 100 EXAM 2 QUESTIONS ANSWERED CORRECTLY LATEST UPDATE 2026
Sole Proprietorship - Answers one owner responsible for own debt
Partenership - Answers Business owned by two or more people. More liable to personal loss
General Partnership - Answers partnership in which partners share equally in both responsibility and
liability
limited partnership - Answers A partnership with one or more general partners and one or more
limited partners.
S coporation - Answers special IRS taxes avoids double taxation, have up to 100 share holders
C Corporation - Answers double taxation, easy to sell, venture capital friendly
Corporations - Answers (articles of incorporation) legal document filled with a state government to
establish the existence.
(bylaws) represents the rules of corp
(board of directors) elected by stockholders rep'd by interest
(LLC) limited liability company - Answers owners are not personally liable for claims for claims against
it, flexible tax treatment, meant to last limited duration
business models - Answers franchise(franchisor/franchisee), multi-level marketing, pyramid scheme,
Ponzi scheme
Multi-level marketing - Answers network marketing= direct selling
legal.
involves non-salaried independent distributors who participate with the chance to make own business
successful through a business opportunity.
pyramid scheme - Answers An illegal form of multi-level marketing in which emphasis is placed on
collecting initial fees from as many people as possible
Ponzi Scheme - Answers a form of fraud in which belief in the success of a nonexistent enterprise is
fostered by the payment of quick returns to the first investors from money invested by later investors.
The first stage in activity-based costing is to: - Answers identify specific activities that create indirect
costs and determine the factors that drive the costs of these activities.
Tania, a management accountant in a cosmetics company, is asked by her manager to calculate the
profit or loss earned by the company in a given time period . To get the required data, Tania is most
likely to: - Answers subtract the company's expenses from its revenues.
Aegirine Corp., a publicly traded firm based in New Mexico, manufactures iron. According to U.S.
securities laws, the firm must: - Answers let an independent CPA (Certified Public Accountant) firm
perform an annual external audit of its financial statements.
Daniel, the owner of a bookstore, decides to reinvest his personal profits from the current fiscal year
toward renovating the store and expanding its inventory. In the context of owners' equity, the profits
that Daniel reinvests in the bookstore are called: - Answers retained earnings.
The preparation of operating budgets begins with the development of a(n) _____. - Answers sales
budget
The chief financial officer of NoveauNoir Production Company requests his accountant, Felipe, to
prepare a customized report of the cost overruns at the company's production facility in Los Angeles.
In this scenario, Felipe is a managerial accountant. - Answers true
The Securities and Exchange Commission hires Tim to procure and analyze data on the state's tax
revenues and expenditures to ensure that they are recorded and reported in accordance with
regulations and requirements. In this case, Tim is most likely a(n) _____. - Answers government
accountant
The management of a sugar manufacturing company sets aside a sum of $50,000 in its budget for the
purchase of new machinery that would double the production. In the given scenario, the
management is in the process of planning the _____ of the company. - Answers operating budget
Fred, a financial accountant at a multinational company, is asked by his supervisor to find out the
exact income the company earns from the sale of its products over the next five weeks. To do this, for
the next five weeks, Fred matches the revenue earned from the sale of the company's products and
matches the expenses incurred by the company to the revenue they help produce. In this scenario,
which of the following has Fred used to get the required information? - Answers Accrual-basis
accounting
The current liabilities of a company are reflected in the: - Answers wages owed to the workers for
work that they have already completed.
, _____ is the profit or loss a firm earns in the time period covered by the financial statement that
reports the revenues and expenses. - Answers Net income
The Securities and Exchange Commission (SEC) bans publicly traded corporations from making
comparative financial statements. - Answers false
David, a financial accountant at a multinational company, is asked to study the comparative financial
statements of a prospective partner firm. He uses comparative income statements to determine the
changes in the assets and liabilities of the firm and whether the net income of the firm has increased
or decreased over the past five years. In this scenario, David is most likely using _____. - Answers
horizontal analysis
In the context of balance sheets, the accounting equation tells us that the value of a firm's assets
must be: - Answers equal to the amount of financing provided by owners plus the amount provided
by creditors to purchase those assets.
Ashley, a manager at a toy manufacturing company, needs to create a financial document for the
company that would show how the company's operating, investing, and financing activities are
expected to affect the asset, liability, and owners' equity accounts. To prepare this document, Ashley
needs to collect data from: - Answers the budgeted income statement, the capital expenditure
budget, and the cash budget
In the context of budgeting, a flexible budget: - Answers is designed to show the appropriate
budgeted level of costs for each different level of sales
Machvile Corporation, a robotics company, decides to acquire Chancera Inc., a start-up company that
operates within the same industry. To better assess its decision, the management of Machvile
Corporation needs to find out the value of Chancera Inc.'s total assets. The management has
information regarding Chancera Inc.'s liabilities and stockholders' equity. In this scenario, the
management should most likely use the _____ to get the required information. - Answers accounting
equation
What is accounting? - Answers planning, recording, analyzing, and interpreting financial information
revenue - Answers income
Balance Sheet - Answers Assets = Liabilities + Stockholders' Equity
assets= resources owned by company
liabilities= resources owed to creditors
stock equity= resources owed to stockholders
Net Income - Answers Revenues - Expenses
Westbro Inc., a home appliances company, wants to invest in marketing new products. In order to
generate funds for the process, it issues its own formal IOUs and sells them to its investors. Which of
the following sources of long-term funds is being used by Westbro Inc. in the given scenario? -
Answers corporate bonds
As the recession of 2007-2008 loomed over both large and small businesses, many firms looked for
ways to deleverage. The term deleveraging implies that: - Answers the firms replaced much of the
debt in their capital structure with equity.
Commercial paper, which is sometimes issued for as little as two days, can be issued for up to 270
days. - Answers true
A factor is a restriction lenders impose on borrowers as a condition of providing long-term debt
financing. - Answers false
Initiatium, a software development firm, utilized $2 million to create a new software. Half of the total
budget was acquired from loans from different sponsors while the rest was funded by the firm. The
debt ratio amounts to 0.5. The given scenario illustrates the analysis of _____. - Answers leverage
ratios
When conflicts arise between the long-term interests of owners and those of other stakeholders, the
fiduciary duty required of financial managers generally leads them to make decisions that are most
consistent with the interests of ownership. - Answers true
For a corporation, direct investment from owners occurs when: - Answers it sells newly issued stock
An advantage of factoring is that: - Answers get money back almost immediately if using firms
Which of the following statements best describes a money market mutual fund? - Answers It pools
funds from many investors and uses these funds to purchase very safe, highly liquid securities.
_____ is a guaranteed line of credit in which a bank makes a binding commitment to provide a
business with funds up to a specified credit limit at any time during the term of the agreement. -
Answers revolving credit agreement
Sole Proprietorship - Answers one owner responsible for own debt
Partenership - Answers Business owned by two or more people. More liable to personal loss
General Partnership - Answers partnership in which partners share equally in both responsibility and
liability
limited partnership - Answers A partnership with one or more general partners and one or more
limited partners.
S coporation - Answers special IRS taxes avoids double taxation, have up to 100 share holders
C Corporation - Answers double taxation, easy to sell, venture capital friendly
Corporations - Answers (articles of incorporation) legal document filled with a state government to
establish the existence.
(bylaws) represents the rules of corp
(board of directors) elected by stockholders rep'd by interest
(LLC) limited liability company - Answers owners are not personally liable for claims for claims against
it, flexible tax treatment, meant to last limited duration
business models - Answers franchise(franchisor/franchisee), multi-level marketing, pyramid scheme,
Ponzi scheme
Multi-level marketing - Answers network marketing= direct selling
legal.
involves non-salaried independent distributors who participate with the chance to make own business
successful through a business opportunity.
pyramid scheme - Answers An illegal form of multi-level marketing in which emphasis is placed on
collecting initial fees from as many people as possible
Ponzi Scheme - Answers a form of fraud in which belief in the success of a nonexistent enterprise is
fostered by the payment of quick returns to the first investors from money invested by later investors.
The first stage in activity-based costing is to: - Answers identify specific activities that create indirect
costs and determine the factors that drive the costs of these activities.
Tania, a management accountant in a cosmetics company, is asked by her manager to calculate the
profit or loss earned by the company in a given time period . To get the required data, Tania is most
likely to: - Answers subtract the company's expenses from its revenues.
Aegirine Corp., a publicly traded firm based in New Mexico, manufactures iron. According to U.S.
securities laws, the firm must: - Answers let an independent CPA (Certified Public Accountant) firm
perform an annual external audit of its financial statements.
Daniel, the owner of a bookstore, decides to reinvest his personal profits from the current fiscal year
toward renovating the store and expanding its inventory. In the context of owners' equity, the profits
that Daniel reinvests in the bookstore are called: - Answers retained earnings.
The preparation of operating budgets begins with the development of a(n) _____. - Answers sales
budget
The chief financial officer of NoveauNoir Production Company requests his accountant, Felipe, to
prepare a customized report of the cost overruns at the company's production facility in Los Angeles.
In this scenario, Felipe is a managerial accountant. - Answers true
The Securities and Exchange Commission hires Tim to procure and analyze data on the state's tax
revenues and expenditures to ensure that they are recorded and reported in accordance with
regulations and requirements. In this case, Tim is most likely a(n) _____. - Answers government
accountant
The management of a sugar manufacturing company sets aside a sum of $50,000 in its budget for the
purchase of new machinery that would double the production. In the given scenario, the
management is in the process of planning the _____ of the company. - Answers operating budget
Fred, a financial accountant at a multinational company, is asked by his supervisor to find out the
exact income the company earns from the sale of its products over the next five weeks. To do this, for
the next five weeks, Fred matches the revenue earned from the sale of the company's products and
matches the expenses incurred by the company to the revenue they help produce. In this scenario,
which of the following has Fred used to get the required information? - Answers Accrual-basis
accounting
The current liabilities of a company are reflected in the: - Answers wages owed to the workers for
work that they have already completed.
, _____ is the profit or loss a firm earns in the time period covered by the financial statement that
reports the revenues and expenses. - Answers Net income
The Securities and Exchange Commission (SEC) bans publicly traded corporations from making
comparative financial statements. - Answers false
David, a financial accountant at a multinational company, is asked to study the comparative financial
statements of a prospective partner firm. He uses comparative income statements to determine the
changes in the assets and liabilities of the firm and whether the net income of the firm has increased
or decreased over the past five years. In this scenario, David is most likely using _____. - Answers
horizontal analysis
In the context of balance sheets, the accounting equation tells us that the value of a firm's assets
must be: - Answers equal to the amount of financing provided by owners plus the amount provided
by creditors to purchase those assets.
Ashley, a manager at a toy manufacturing company, needs to create a financial document for the
company that would show how the company's operating, investing, and financing activities are
expected to affect the asset, liability, and owners' equity accounts. To prepare this document, Ashley
needs to collect data from: - Answers the budgeted income statement, the capital expenditure
budget, and the cash budget
In the context of budgeting, a flexible budget: - Answers is designed to show the appropriate
budgeted level of costs for each different level of sales
Machvile Corporation, a robotics company, decides to acquire Chancera Inc., a start-up company that
operates within the same industry. To better assess its decision, the management of Machvile
Corporation needs to find out the value of Chancera Inc.'s total assets. The management has
information regarding Chancera Inc.'s liabilities and stockholders' equity. In this scenario, the
management should most likely use the _____ to get the required information. - Answers accounting
equation
What is accounting? - Answers planning, recording, analyzing, and interpreting financial information
revenue - Answers income
Balance Sheet - Answers Assets = Liabilities + Stockholders' Equity
assets= resources owned by company
liabilities= resources owed to creditors
stock equity= resources owed to stockholders
Net Income - Answers Revenues - Expenses
Westbro Inc., a home appliances company, wants to invest in marketing new products. In order to
generate funds for the process, it issues its own formal IOUs and sells them to its investors. Which of
the following sources of long-term funds is being used by Westbro Inc. in the given scenario? -
Answers corporate bonds
As the recession of 2007-2008 loomed over both large and small businesses, many firms looked for
ways to deleverage. The term deleveraging implies that: - Answers the firms replaced much of the
debt in their capital structure with equity.
Commercial paper, which is sometimes issued for as little as two days, can be issued for up to 270
days. - Answers true
A factor is a restriction lenders impose on borrowers as a condition of providing long-term debt
financing. - Answers false
Initiatium, a software development firm, utilized $2 million to create a new software. Half of the total
budget was acquired from loans from different sponsors while the rest was funded by the firm. The
debt ratio amounts to 0.5. The given scenario illustrates the analysis of _____. - Answers leverage
ratios
When conflicts arise between the long-term interests of owners and those of other stakeholders, the
fiduciary duty required of financial managers generally leads them to make decisions that are most
consistent with the interests of ownership. - Answers true
For a corporation, direct investment from owners occurs when: - Answers it sells newly issued stock
An advantage of factoring is that: - Answers get money back almost immediately if using firms
Which of the following statements best describes a money market mutual fund? - Answers It pools
funds from many investors and uses these funds to purchase very safe, highly liquid securities.
_____ is a guaranteed line of credit in which a bank makes a binding commitment to provide a
business with funds up to a specified credit limit at any time during the term of the agreement. -
Answers revolving credit agreement
