Test Bank for Survey of Accounting 10th Edition
by Carl Warren, Amanda Farmer A+
1. The popularity of the sole proprietorship is due to the ease and low cost of organizing.
a. True
b. False
ANSWER: True
2. A corporation is a business that is legally separate and distinct from its owners.
a. True
b. False
ANSWER: True
3. Merchandising businesses produce products rather than provide services to customers.
a. True
b. False
ANSWER: False
4. A partnership is owned by two or more individuals.
a. True
b. False
A+ Page 1
,ANSWER: True
5. A limited liability company combines attributes of a partnership and a corporation.
a. True
b. False
A+ Page 2
,ANSWER: True
6. The ownership of a proprietorship is divided into shares of stock owned by its
stockholders.
a. True
b. False
ANSWER: False
7. Accounting is often called the "language of business" because business information is
communicated to stakeholders.
a. True
b. False
ANSWER: True
8. John Deere is a leading manufacturer of agricultural machinery in the world,
producing products that serve unique market needs. Therefore, John Deere is an example of a
company that uses a premium-price approach to attract customers.
a. True
b. False
ANSWER: True
9. Creditors have preference to assets behind stockholders if a business fails.
a. True
b. False
ANSWER: False
10. A liability is a legal obligation to repay the amount borrowed according to the terms
of the borrowing agreement.
a. True
A+ Page 3
, b. False
ANSWER: True
11. The balance sheet represents the accounting equation.
a. True
b. False
ANSWER: True
12. A primary disadvantage of corporations is that the financial resources available to
them are limited.
a. True
b. False
ANSWER: False
13. Assets are acquired through investing activities when resources are purchased.
a. True
b. False
ANSWER: True
14. The objective of most businesses is to maximize profits.
a. True
b. False
ANSWER: True
15. The stockholders' equity of a company should equal the sum of its total assets and
total liabilities.
a. True
b. False
A+ Page 4
by Carl Warren, Amanda Farmer A+
1. The popularity of the sole proprietorship is due to the ease and low cost of organizing.
a. True
b. False
ANSWER: True
2. A corporation is a business that is legally separate and distinct from its owners.
a. True
b. False
ANSWER: True
3. Merchandising businesses produce products rather than provide services to customers.
a. True
b. False
ANSWER: False
4. A partnership is owned by two or more individuals.
a. True
b. False
A+ Page 1
,ANSWER: True
5. A limited liability company combines attributes of a partnership and a corporation.
a. True
b. False
A+ Page 2
,ANSWER: True
6. The ownership of a proprietorship is divided into shares of stock owned by its
stockholders.
a. True
b. False
ANSWER: False
7. Accounting is often called the "language of business" because business information is
communicated to stakeholders.
a. True
b. False
ANSWER: True
8. John Deere is a leading manufacturer of agricultural machinery in the world,
producing products that serve unique market needs. Therefore, John Deere is an example of a
company that uses a premium-price approach to attract customers.
a. True
b. False
ANSWER: True
9. Creditors have preference to assets behind stockholders if a business fails.
a. True
b. False
ANSWER: False
10. A liability is a legal obligation to repay the amount borrowed according to the terms
of the borrowing agreement.
a. True
A+ Page 3
, b. False
ANSWER: True
11. The balance sheet represents the accounting equation.
a. True
b. False
ANSWER: True
12. A primary disadvantage of corporations is that the financial resources available to
them are limited.
a. True
b. False
ANSWER: False
13. Assets are acquired through investing activities when resources are purchased.
a. True
b. False
ANSWER: True
14. The objective of most businesses is to maximize profits.
a. True
b. False
ANSWER: True
15. The stockholders' equity of a company should equal the sum of its total assets and
total liabilities.
a. True
b. False
A+ Page 4
