Part 1: True or False (2 pts each) Instructions: Indicate whether the following statements are true or false. 1. Profitability measures short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash. 2. The five primary component of internal control are a control environment, risk assessment, control activities, information and communication and monitoring. 3. The formula to compute for Current Ratio is Current Assets divided by Total Liabilities.. 4. A collection of cash for services performed is part of the Operating Cash Flow Activity 5. Partners jointly own partnership assets. A partner's claim on partnership assets does not attach to specific assets. 6. Both internal and external users have the same purpose of using the accounting information. 7. The 2 primary sources of equity for a corporation are Paid in Capital and Retained Earnings 8. The primary source of revenue for a merchandising company results from performing services for customers. 9. Relevance and Faithful Representation are two primary qualities that make accounting information useful for decision making 10. Identification, recording, and communication are the three steps in the accounting process. 11. The use of pre-numbered checks in disbursing cash is an application of the principle of establishment of responsibility 12. Similar to partners in a partnership, stockholders of a corporation have unlimited liability. 13. The operating cycle of a service company is usually shorter than that of a merchandising company. 14. Ending inventory plus the cost of goods purchased equals cost of goods available for sale. 15. Sarbanes-Oxley Act (SOX) are standards that are generally accepted and universally practiced. These standards indicate how to report economic events. 1