Libby/Libby/Hodge Financial Accounting, 11th Edition
Solution Manual
T/F Corporations generally receive more favorable tax treatment than sole
proprietorships and partnerships. - ANSWER: False. Sole proprietorships and
partnerships generally receive more favorable tax treatment than corporations.
Which is not one of the three forms of business organization? Creditorship,
Corporation, Sole proprietorship, Partnership - ANSWER: Creditorship
Which is an advantage of corporations relative to partnerships and sole
proprietorships? Reduced legal liability for investors, Most common form of
organization,
Increased difficulty of raising funds, Harder to transfer ownership - ANSWER:
Reduced legal liability for investors
Easy transfer of ownership is a characteristic of which form of business organization?
Corporation, Sole proprietorship, All of the answer choices are correct, Partnership -
ANSWER: Corporation
In which forms of business organization are the owners personally liable for all the
debts of the business?
Sole proprietorships and corporations,
Sole proprietorships and partnerships,
Partnership and corporation,
All of the answer choices are correct - ANSWER: Sole proprietorships and
partnerships
The sole proprietorship form of business organization.... combines the records of the
business with the personal records of the owner., is classified as a separate legal
entity., must have at least two owners in most states., generally receives favorable
tax treatment relative to a corporation. - ANSWER: generally receives favorable tax
treatment relative to a corporation.
Which forms of business organization are considered to be separate accounting
entities? Only corporations, Partnerships and corporations only, Sole
proprietorships, corporations, and partnerships, Sole proprietorships and
partnerships only - ANSWER: Sole proprietorships, corporations, and partnerships
T/F Internal users of accounting information include a company's stockholders. -
ANSWER: False: Since stockholders are not normally officers, directors, or managers
of the company, they are considered external users of accounting information.
, To which of the following questions will internal users want answers? Is cash
sufficient to pay dividends to stockholders?, What selling price for our product will
maximize the company's net income?, All of the answer choices are correct., Which
product line is most profitable? - ANSWER: All of the answer choices are correct.
Which of the following is not an external user of accounting data? Customers, Labor
unions, Chief Financial Officer, Economic planners - ANSWER: Chief Financial Officer
Which statement about users of accounting information is incorrect? Present
creditors are considered external users. Taxing authorities are considered external
users. Regulatory authorities are considered internal users. Management is
considered an internal user. - ANSWER: Regulatory authorities are considered
internal users.
Which of the following did not result from the Sarbanes-Oxley Act? Auditors cannot
provide non-audit services to the same client. Tax rates on corporations increased.
Top management must now certify the accuracy of financial information. Penalties
for fraudulent activity increased. - ANSWER: Tax rates on corporations increased.
Which of the following is the most appropriate definition of accounting information?
A means of collecting information, The information system that identifies, records,
and communicates the economic events of an organization to interested users,
Electronic collection and organization of vast amounts of financial information, The
interconnected network of subsystems necessary to operate a business - ANSWER:
The information system that identifies, records, and communicates the economic
events of an organization to interested users
Which of the following is required as a result of SOX? Companies that go bankrupt
must repay shareholders for loss investments. All shareholders now have an
oversight role of the company's financial activities. Top management must certify the
financial statements for their company. Public companies must present audited
financial statements. - ANSWER: Top management must certify the financial
statements for their company.
T/F: Interest expense is classified under operating activities on the statement of cash
flows. - ANSWER: True. Since interest expense is the cost of obtaining operating
capital it is properly classified as an expense under operating activities.
Paying interest expense and receiving interest revenue are examples of:
Operating activities.
Delivery activities.
Financing activities.
Investing activities. - ANSWER: Operating activities.
The payment of dividends is an example of a(n):
Financing activity.
Operating activity.
Solution Manual
T/F Corporations generally receive more favorable tax treatment than sole
proprietorships and partnerships. - ANSWER: False. Sole proprietorships and
partnerships generally receive more favorable tax treatment than corporations.
Which is not one of the three forms of business organization? Creditorship,
Corporation, Sole proprietorship, Partnership - ANSWER: Creditorship
Which is an advantage of corporations relative to partnerships and sole
proprietorships? Reduced legal liability for investors, Most common form of
organization,
Increased difficulty of raising funds, Harder to transfer ownership - ANSWER:
Reduced legal liability for investors
Easy transfer of ownership is a characteristic of which form of business organization?
Corporation, Sole proprietorship, All of the answer choices are correct, Partnership -
ANSWER: Corporation
In which forms of business organization are the owners personally liable for all the
debts of the business?
Sole proprietorships and corporations,
Sole proprietorships and partnerships,
Partnership and corporation,
All of the answer choices are correct - ANSWER: Sole proprietorships and
partnerships
The sole proprietorship form of business organization.... combines the records of the
business with the personal records of the owner., is classified as a separate legal
entity., must have at least two owners in most states., generally receives favorable
tax treatment relative to a corporation. - ANSWER: generally receives favorable tax
treatment relative to a corporation.
Which forms of business organization are considered to be separate accounting
entities? Only corporations, Partnerships and corporations only, Sole
proprietorships, corporations, and partnerships, Sole proprietorships and
partnerships only - ANSWER: Sole proprietorships, corporations, and partnerships
T/F Internal users of accounting information include a company's stockholders. -
ANSWER: False: Since stockholders are not normally officers, directors, or managers
of the company, they are considered external users of accounting information.
, To which of the following questions will internal users want answers? Is cash
sufficient to pay dividends to stockholders?, What selling price for our product will
maximize the company's net income?, All of the answer choices are correct., Which
product line is most profitable? - ANSWER: All of the answer choices are correct.
Which of the following is not an external user of accounting data? Customers, Labor
unions, Chief Financial Officer, Economic planners - ANSWER: Chief Financial Officer
Which statement about users of accounting information is incorrect? Present
creditors are considered external users. Taxing authorities are considered external
users. Regulatory authorities are considered internal users. Management is
considered an internal user. - ANSWER: Regulatory authorities are considered
internal users.
Which of the following did not result from the Sarbanes-Oxley Act? Auditors cannot
provide non-audit services to the same client. Tax rates on corporations increased.
Top management must now certify the accuracy of financial information. Penalties
for fraudulent activity increased. - ANSWER: Tax rates on corporations increased.
Which of the following is the most appropriate definition of accounting information?
A means of collecting information, The information system that identifies, records,
and communicates the economic events of an organization to interested users,
Electronic collection and organization of vast amounts of financial information, The
interconnected network of subsystems necessary to operate a business - ANSWER:
The information system that identifies, records, and communicates the economic
events of an organization to interested users
Which of the following is required as a result of SOX? Companies that go bankrupt
must repay shareholders for loss investments. All shareholders now have an
oversight role of the company's financial activities. Top management must certify the
financial statements for their company. Public companies must present audited
financial statements. - ANSWER: Top management must certify the financial
statements for their company.
T/F: Interest expense is classified under operating activities on the statement of cash
flows. - ANSWER: True. Since interest expense is the cost of obtaining operating
capital it is properly classified as an expense under operating activities.
Paying interest expense and receiving interest revenue are examples of:
Operating activities.
Delivery activities.
Financing activities.
Investing activities. - ANSWER: Operating activities.
The payment of dividends is an example of a(n):
Financing activity.
Operating activity.
