In a sole proprietorship, the owner is personally responsible without limitation for the liabilities incurred.

In a sole proprietorship, the owner is personally responsible without limitation for the liabilities incurred.

Answer:  TRUE

In a limited partnership, at least one general partner must remain in the association; the privilege of limited liability still applies to this partner.

Answer:  FALSE

In a general partnership, each partner is liable for the partnership's obligations only up to a percentage of the obligation equal to that partner's percentage of ownership of the partnership.

Answer:  FALSE 

The owners of a corporation are liable for the corporation's obligations up to the amount of their investment.

Answer:  TRUE

General partners have unrestricted transferability of ownership, while limited partners must have the consent of all partners to transfer their ownership.

Answer:  FALSE

Ultimate control in a corporation is vested in the board of directors.

Answer:  FALSE

Owners must register and pay yearly fees to their State of residence when establishing a sole proprietorship.

Answer:  FALSE

Limited partners may actively manage the business.

Answer:  FALSE

The life of a corporation is not dependent upon the status of the investors.

Answer:  TRUE

 A sole proprietorship is the most desirable business form in all circumstances.

Answer:  FALSE

A company's balance sheet reports total liabilities of $2,000,000. The debt to equity ratio is 2.5. What is the company's stockholders' equity?

A) $800,000

B) $320,000

C) $1,000,000

D) $2,000,000

Answer: A

Which of the following accounts is not reported in the stockholders' equity section of the balance sheet?

A) Treasury Stock.

B) Common Stock.

C) Sales Revenue.

D) Retained Earnings.

Answer: C

The times interest earned ratio is calculated as

A) Interest expense/Net income.

B) Net income/Interest expense.

C) (Net income + interest expense + tax expense)/Interest expense.

D) Interest expense/(Net income + interest expense + tax expense).

Answer: C

Which of the following would result in an increase in the current ratio, but not necessarily the acid-test ratio?

A) Increase in current assets.

B) Increase in quick assets.

C) Decrease in current liabilities.

D) Decrease in current assets.

Answer: A

The mixture of liabilities and stockholders' equity a business uses is called its:

A) Bond contract.

B) Carrying value.

C) Capital structure.

D) Accounting equation.

Answer: C

Which of the following is not a true statement?

A) Companies that are believed to have high bankruptcy risk generally receive low credit ratings and must pay a higher interest rate for borrowing.

B) As a company's level of debt increases, the risk of bankruptcy increases.

C) Interest expense incurred when borrowing money, as well as dividends paid to stockholders, are both tax-deductible.

D) The mixture of liabilities and stockholders' equity a business uses is called its capital structure.

Answer: C

The following table contains financial information for Trumpeter Inc. before closing entries:

The following table contains financial information for Trumpeter Inc. before closing entries:

Cash $ 12,000

Supplies 4,500

Prepaid Rent 2,000

Salaries Expense 4,500

Equipment 65,000

Service Revenue 30,000

Miscellaneous Expense 20,000

Dividends 3,000

Accounts Payable 5,000

Common Stock 68,000

Retained Earnings 8,000

What is the amount of Trumpeter's total stockholders' equity?

A) $5,000.

B) $78,500.

C) $68,500.

D) $83,500.

Answer: B

The following table contains financial information for Trumpeter Inc. before closing entries:

Cash $ 12,000

Supplies 4,500

Prepaid Rent 2,000

Salaries Expense 4,500

Equipment 65,000

Service Revenue 30,000

Miscellaneous Expense 20,000

Dividends 3,000

Accounts Payable 5,000

Common Stock 68,000

Retained Earnings 8,000

What is the amount of Trumpeter's total liabilities?

A) $5,000.

B) $78,500.

C) $68,500.

D) $83,500.

Answer: A