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CHAPTER 1 ACCOUNTING IN ACTION SUMMARY OF QUESTIshowing page 12 out of 53

Test Bank for Accounting Principles, Eighth Edition
1 - 12
81.
Which of the following is true regarding the corporate form of business organization?
a.
Corporations are the most prevalent form of business organization.
b. Corporate businesses are generally smaller in size than partnerships and proprietor-
ships.
c.
The revenues of corporations are greater than the combined revenues of partnerships
and proprietorships.
d.
Corporations are separate legal entities organized exclusively under federal law.
82.
A basic assumption of accounting that requires activities of an entity be kept separate
from the activities of its owner is referred to as the
a. stand alone concept.
b. monetary unit assumption.
c.
corporate form of ownership.
d. economic entity assumption.
83.
Deb Smith is the proprietor (owner) of Smitty's, a retailer of athletic apparel. When
recording the financial transactions of Smitty's, Deb does not record an entry for a car she
purchased for personal use. Deb took out a personal loan to pay for the car. What
accounting concept guides Deb's behavior in this situation?
a. Pay back concept
b. Economic entity assumption
c. Cash basis concept
d. Monetary unit assumption
84.
A basic assumption of accounting assumes that the dollar is
a. unrelated to business transactions.
b.
a poor measure of economic activities.
c.
the common unit of measure for all business transactions.
d.
useless in measuring an economic event.
85.
The assumption that the unit of measure remains sufficiently constant over time is part of
the
a. economic entity assumption.
b. cost principle.
c. historical cost principle.
d. monetary unit assumption.
86.
A business that enjoys limited liability is a
a. proprietorship.
b. partnership.
c. corporation.
d. sole proprietorship.
87.
A problem with the monetary unit assumption is that
a.
the dollar has not been stable over time.
b.
the dollar has been stable over time.
c.
the dollar is a common medium of exchange.
d.
it is impossible to account for international transactions.

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