FINAL EXAM CBAD 201 VERIFIED
QUESTIONS AND CORRECT ANSWERS
2026
Which of the following is considered to be an advantage of a
corporation? - CORRECT ANSWER- Continuous life.
Limited liability of stockholders for the corporation's debts.
Ability to raise more capital than a partnership or proprietorship
Stockholders of a corporation directly elect the - CORRECT ANSWER-
board of directors.
Double taxation means that the: - CORRECT ANSWER- corporation
pays taxes on its earnings and the shareholders pay taxes on the
dividends received from the corporation.
A charter to incorporate is obtained from the ___________ in which the
company chooses to incorporate. - CORRECT ANSWER- State
The par value of a share of common stock - CORRECT ANSWER- is
stated in the charter.
The calculation to determine the number of outstanding shares of stock
is the number of: - CORRECT ANSWER- issued shares - number of
treasury shares.
Previously issued stock that a corporation purchases from shareholders
is called: - CORRECT ANSWER- treasury stock.
A stock split - CORRECT ANSWER- has no effect on total
stockholders' equity.
,What is the current ratio formula? - CORRECT ANSWER- current
assets / current liabilities
equity financing vs. debt financing - CORRECT ANSWER- Equity
Financing- Funds provided by the owners of a company
Debt financing- borrowing money (creditors)
current vs long term liabilities - CORRECT ANSWER- -current: due
within one year or an operating cycle
-long-term: due in more than one year or operating cycle
What are debt covenants? - CORRECT ANSWER- Rules the
borrower must comply with otherwise the lender can demand the loan to
be repaid immediately
authority structure of a corporation - CORRECT ANSWER-
What is Theranos? - CORRECT ANSWER- Blood testing company
founded in 2003 by Elizabeth Holmes. Defrauding investors
The owner of a ________ is personally liable for all the business's debts.
- CORRECT ANSWER- proprietorship
In 1990, Johnson Company purchased a building for $200,000. In 2022,
a real estate professional says the building has a fair value of
$1,900,000. In 2022, a similar building down the street recently sold for
$900,000. What value, before consideration of accumulated
depreciation, is reported for the building on the balance sheet at
December 31, 2022? - CORRECT ANSWER- $200,000
The principle stating that assets acquired by the business should be
recorded at their actual cost on the date of purchase is: - CORRECT
ANSWER- historical cost.
The assets of a company: - CORRECT ANSWER- resources that are
expected to produce a future benefit.
, Receivables are classified as: - CORRECT ANSWER- assets
Net income is computed as: - CORRECT ANSWER- revenues −
expenses.
At the end of the current accounting period, account balances were as
follows: Cash, $28,000; Accounts Receivable, $40,000; Common Stock,
$19,000; Retained Earnings, $12,000. Liabilities at the end of the period
were: - CORRECT ANSWER- $37,000.
Jonathan is a patent attorney and is starting a legal practice. What form
of business organization limits his liability to the amount he has invested
in the business? - CORRECT ANSWER- Corporation
Revenues were $144,000, expenses were $140,000, and cash dividends
declared and paid were $2,000. What were the net income and the
change in retained earnings for the period? - CORRECT ANSWER-
Net income was $4,000; the change in retained earnings was $2,000.
Which financial statement answers the following question: How well did
the company perform during the year? - CORRECT ANSWER-
income statement
The portion of net income that the company has kept over a period of
years and not used for dividends is called: - CORRECT ANSWER-
retained earnings.
The balance sheet reports information about: - CORRECT ANSWER-
assets, liabilities, and equity.
Which financial statement must be prepared before the others? -
CORRECT ANSWER- income statement
The ending balance of Retained Earnings is reported on the: -
CORRECT ANSWER- Balance Sheet & Statement of Retained
Earnings.
QUESTIONS AND CORRECT ANSWERS
2026
Which of the following is considered to be an advantage of a
corporation? - CORRECT ANSWER- Continuous life.
Limited liability of stockholders for the corporation's debts.
Ability to raise more capital than a partnership or proprietorship
Stockholders of a corporation directly elect the - CORRECT ANSWER-
board of directors.
Double taxation means that the: - CORRECT ANSWER- corporation
pays taxes on its earnings and the shareholders pay taxes on the
dividends received from the corporation.
A charter to incorporate is obtained from the ___________ in which the
company chooses to incorporate. - CORRECT ANSWER- State
The par value of a share of common stock - CORRECT ANSWER- is
stated in the charter.
The calculation to determine the number of outstanding shares of stock
is the number of: - CORRECT ANSWER- issued shares - number of
treasury shares.
Previously issued stock that a corporation purchases from shareholders
is called: - CORRECT ANSWER- treasury stock.
A stock split - CORRECT ANSWER- has no effect on total
stockholders' equity.
,What is the current ratio formula? - CORRECT ANSWER- current
assets / current liabilities
equity financing vs. debt financing - CORRECT ANSWER- Equity
Financing- Funds provided by the owners of a company
Debt financing- borrowing money (creditors)
current vs long term liabilities - CORRECT ANSWER- -current: due
within one year or an operating cycle
-long-term: due in more than one year or operating cycle
What are debt covenants? - CORRECT ANSWER- Rules the
borrower must comply with otherwise the lender can demand the loan to
be repaid immediately
authority structure of a corporation - CORRECT ANSWER-
What is Theranos? - CORRECT ANSWER- Blood testing company
founded in 2003 by Elizabeth Holmes. Defrauding investors
The owner of a ________ is personally liable for all the business's debts.
- CORRECT ANSWER- proprietorship
In 1990, Johnson Company purchased a building for $200,000. In 2022,
a real estate professional says the building has a fair value of
$1,900,000. In 2022, a similar building down the street recently sold for
$900,000. What value, before consideration of accumulated
depreciation, is reported for the building on the balance sheet at
December 31, 2022? - CORRECT ANSWER- $200,000
The principle stating that assets acquired by the business should be
recorded at their actual cost on the date of purchase is: - CORRECT
ANSWER- historical cost.
The assets of a company: - CORRECT ANSWER- resources that are
expected to produce a future benefit.
, Receivables are classified as: - CORRECT ANSWER- assets
Net income is computed as: - CORRECT ANSWER- revenues −
expenses.
At the end of the current accounting period, account balances were as
follows: Cash, $28,000; Accounts Receivable, $40,000; Common Stock,
$19,000; Retained Earnings, $12,000. Liabilities at the end of the period
were: - CORRECT ANSWER- $37,000.
Jonathan is a patent attorney and is starting a legal practice. What form
of business organization limits his liability to the amount he has invested
in the business? - CORRECT ANSWER- Corporation
Revenues were $144,000, expenses were $140,000, and cash dividends
declared and paid were $2,000. What were the net income and the
change in retained earnings for the period? - CORRECT ANSWER-
Net income was $4,000; the change in retained earnings was $2,000.
Which financial statement answers the following question: How well did
the company perform during the year? - CORRECT ANSWER-
income statement
The portion of net income that the company has kept over a period of
years and not used for dividends is called: - CORRECT ANSWER-
retained earnings.
The balance sheet reports information about: - CORRECT ANSWER-
assets, liabilities, and equity.
Which financial statement must be prepared before the others? -
CORRECT ANSWER- income statement
The ending balance of Retained Earnings is reported on the: -
CORRECT ANSWER- Balance Sheet & Statement of Retained
Earnings.
