ACCOUNTING 333 CHAPTER 1 PRACTICE QUIZ

ACCOUNTING 333 CHAPTER 1 PRACTICE QUIZ The treasurer and the controller of a corporation generally report to the: o president. o board of directors. o chief executive officer. o chief financial officer. o chairman of the board. 2. Which one of these best describes the key difference between the duties of the controller and those of the treasurer? o Separation of duties related to assets versus those related to debt and equity o Separation of authority over tax records versus accounting records o Separation of reporting to the Boards of Directors versus directly to investors. o Separation of duties related to production versus marketing o Separation of cash control from accounting records 3. Which position is generally directly responsible for financial planning and capital expenditures? o Controller o Treasurer o Director o Chairman of the board o Chief operations officer 4. Which form(s) of business is a treated as a distinct legal entity separate from its owners? o Limited partnership o Sole proprietorship o General partnership o Corporation o Both a limited partnership and a corporation 5. Which one of these is a corporate document that sets forth the intended life of the firm? o Federal charter o Articles of incorporation o Corporate bylaws o Indenture contract o State charter 6. A general partner: o cannot lose more than the amount of his/her equity investment. o has less legal liability than a limited partner. o faces double taxation whereas a limited partner does not. o has more management responsibility than a limited partner. o is the term applied only to corporations which invest in partnerships. 7. A limited partnership generally: o has less of an ability to raise capital than a proprietorship. o has ten or more limited partners and no general partners. o permits limited partners to sell their ownership interest without the partnership terminating. o is taxed the same as a corporation. o provides for the transfer of a general partner's ownership interest to any outside party. 8. Which of the following are disadvantages of a general partnership? I. Limited life of the firm II. Personal liability for firm debt III. Greater ability to raise capital than a sole proprietorship IV. Lack of ability to transfer partnership interest I and II only o III and IV only o II and III only o I, II, and IV only o I, III, and IV only 9. Art purchased 2,500 shares of Delta stock. His purchase represents ten percent ownership in the firm. His shares have increased in value from the $12 a share he originally paid to today's market value of $23 share. Assume Delta goes bankrupt and owes $450,000 more in debts than the firm can pay after liquidating all of its assets. What is the maximum loss per share Art will incur on this investment? o $0 a share o $12 a share o $17.50 a share, computed as ($12 + 23)/2 o $23 a share o $18 share, computed as (10% × $450,000)/2,500 shares 10. Which one of the following statements is correct? o All types of business formations have limited lives. o Partnerships are the most complicated type of business to form. o Both sole proprietorships and partnerships are taxed in a similar fashion. o Both partnerships and corporations have limited liability for general partners and shareholders. o Both partnerships and corporations incur double taxation. 11. The articles of incorporation: o can be used to remove company management. o are amended annually by the company stockholders. o set forth the number of shares of stock that can be issued. o set forth the rules by which the corporation regulates its existence. o can set forth the conditions under which the firm can avoid double taxation.