True / False Questions
1. Building a new warehouse is an operating activity.
FALSE
It is an investing activity.
AACSB: analytic
AICPA BB: resource management
AICPA FN: reporting
Difficulty: Easy
Learning Objective: 2
2. The payment of dividends is a financing activity.
TRUE
AACSB: analytic
AICPA BB: resource management
AICPA FN: reporting
Difficulty: Medium
Learning Objective: 2
3. Daily activities involved in running a business such as buying supplies and paying wages are
operating activities.
TRUE
AACSB: analytic
AICPA BB: resource management
AICPA FN: reporting
Difficulty: Medium
Learning Objective: 2
,4. Financing activities include borrowing and obtaining money by issuing shares of ownership
(called stock certificates).
TRUE
AACSB: analytic
AICPA BB: resource management
AICPA FN: reporting
Difficulty: Medium
Learning Objective: 2
5. Stockholders are creditors of a company.
FALSE
They are the owners of a company.
AACSB: analytic
AICPA BB: resource management
AICPA FN: reporting
Difficulty: Easy
Learning Objective: 1
6. All corporations acquire financing by issuing shares of ownership (called stock certificates) for
sale on public stock exchanges.
FALSE
Privately owned corporations do not sell stock publicly.
AACSB: analytic
AICPA BB: resource management
AICPA FN: reporting
Difficulty: Medium
Learning Objective: 1
,7. You paid $10,000 to buy 1% of the stock in a corporation that has now gone bankrupt. The
company owes $10 million dollars to creditors. As a result of the bankruptcy, you will lose
$100,000.
FALSE
Owners of a corporation are not liable for the debts of the company.
AACSB: analytic
AICPA BB: legal
AICPA FN: measurement
Difficulty: Medium
Learning Objective: 1
8. The stockholders' equity of a company is the difference between assets and liabilities.
TRUE
AACSB: analytic
AICPA BB: resource management
AICPA FN: reporting
Difficulty: Easy
Learning Objective: 2
9. A company owes $200,000 on a bank loan. If this loan is documented using a formal written
debt contract, it will be reported as a liability called Notes Payable.
TRUE
AACSB: analytic
AICPA BB: resource management
AICPA FN: reporting
Difficulty: Easy
Learning Objective: 2
, 10. The accounting decisions that were made when preparing a company's financial statements
are explained in the auditor's report.
FALSE
Accounting decisions made when preparing financial statements are explained in the notes to the
financial statements.
AACSB: analytic
AICPA BB: legal
AICPA FN: reporting
Difficulty: Medium
Learning Objective: 2
Multiple Choice Questions
1. Building a new warehouse is an operating activity.
FALSE
It is an investing activity.
AACSB: analytic
AICPA BB: resource management
AICPA FN: reporting
Difficulty: Easy
Learning Objective: 2
2. The payment of dividends is a financing activity.
TRUE
AACSB: analytic
AICPA BB: resource management
AICPA FN: reporting
Difficulty: Medium
Learning Objective: 2
3. Daily activities involved in running a business such as buying supplies and paying wages are
operating activities.
TRUE
AACSB: analytic
AICPA BB: resource management
AICPA FN: reporting
Difficulty: Medium
Learning Objective: 2
,4. Financing activities include borrowing and obtaining money by issuing shares of ownership
(called stock certificates).
TRUE
AACSB: analytic
AICPA BB: resource management
AICPA FN: reporting
Difficulty: Medium
Learning Objective: 2
5. Stockholders are creditors of a company.
FALSE
They are the owners of a company.
AACSB: analytic
AICPA BB: resource management
AICPA FN: reporting
Difficulty: Easy
Learning Objective: 1
6. All corporations acquire financing by issuing shares of ownership (called stock certificates) for
sale on public stock exchanges.
FALSE
Privately owned corporations do not sell stock publicly.
AACSB: analytic
AICPA BB: resource management
AICPA FN: reporting
Difficulty: Medium
Learning Objective: 1
,7. You paid $10,000 to buy 1% of the stock in a corporation that has now gone bankrupt. The
company owes $10 million dollars to creditors. As a result of the bankruptcy, you will lose
$100,000.
FALSE
Owners of a corporation are not liable for the debts of the company.
AACSB: analytic
AICPA BB: legal
AICPA FN: measurement
Difficulty: Medium
Learning Objective: 1
8. The stockholders' equity of a company is the difference between assets and liabilities.
TRUE
AACSB: analytic
AICPA BB: resource management
AICPA FN: reporting
Difficulty: Easy
Learning Objective: 2
9. A company owes $200,000 on a bank loan. If this loan is documented using a formal written
debt contract, it will be reported as a liability called Notes Payable.
TRUE
AACSB: analytic
AICPA BB: resource management
AICPA FN: reporting
Difficulty: Easy
Learning Objective: 2
, 10. The accounting decisions that were made when preparing a company's financial statements
are explained in the auditor's report.
FALSE
Accounting decisions made when preparing financial statements are explained in the notes to the
financial statements.
AACSB: analytic
AICPA BB: legal
AICPA FN: reporting
Difficulty: Medium
Learning Objective: 2
Multiple Choice Questions
