True or False

______1. The objective of most businesses is to maximize profits.

______2. Manufacturing businesses change basic inputs into products that are sold to

individual customers

______3. Merchandising businesses produce products rather than provide services to customers.

_______4. The popularity of the sole proprietorship is due to the ease and low cost of organizing.

_______5. A partnership is owned by two or more individuals.

_______6. A primary DISADVANTAGE of a corporation is that stockholders are responsible for all

debts of the company.

______ 7. Over 90% of the total dollars of business receipts are received by corporations

_______8. The accounting equation is expressed as follows: Assets = Liabilities - Stockholders' Equity

_______9. A business receives $10,000 cash for a sale of merchandise, and records this receipt of cash

as an increase in equipment by mistake. The accounting equation is still in balance.

______10. A transaction can affect at most two elements of the accounting equation.

______11. When capital stock is issued by a corporation for cash, both the income statement and the

balance sheet are affected.

______12. Under accrual accounting, revenues are recorded when they are earned, regardless of when

the cash is received.

______13. The accrual basis of accounting is designed to avoid misleading income statement results

that could otherwise result from the timing of cash receipts and payments.

______14. The fixed asset section may also be labeled as property, plant, and equipment.

______15. Land is an example of an intangible asset.

______16. Merchandise inventory is reported as a current asset on the balance sheet.

______17. On the income statement, sales returns and allowances and sales discounts are added to

gross sales to yield net sales.

______18. On the income statement in the single-step form, the total of all expenses is deducted from

the total of all revenues.

______19. Sales discounts are granted by the seller to customers for payment at the end of the month

______20. Revenue from sources other than the primary operating activity of a business is called other

income.