Quiz AC-13 - 1 Question A certain transaction affecting only two accounts causes a liability to increase by a certain amount Which one of the

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1. Question: A certain transaction affecting only two accounts causes a liability to increase by a certain amount. Which one of the following could be another effect of the same transaction? Your Answer: an asset account is increased by the same amount. ( Correct. An increase in an asset account would maintain the equality of the balance sheet equation and, therefore, is a possible effect of this transaction. An example would be the purchase of inventory on account. ) CORRECT another liability account is increased by the same amount. ( Incorrect. An increase in another liability account would not maintain the equality of the balance sheet equation and, therefore, is not a possible effect of this transaction. ) an owner's equity account is increased by the same amount. ( Incorrect. An increase to an owner's equity account would not maintain the equality of the balance sheet equation and, therefore, could not be another effect of this transaction. ) Instructor Explanation: Remember that every transaction must maintain the equality in the balance sheet equation. Points Received: 1 of 1 Comments: 2. Question: Which one of the following is a characteristic of the corporate organizational structure? Your Answer: unlimited liability ( Incorrect. Corporations have the feature of limited liability. ) continuity of existence. ( Correct. A corporation's existence does not terminate with changes in ownership. Therefore, corporations have continuity of existence. ) CORRECT inability to transfer of ownership ( Incorrect. Since corporate ownership is represented by capital stock certificates that can be freely traded among investors, corporate ownership transfer is typically much easier than the transfer of ownership of a sole proprietorship or a partnership interest. ) taxability through the owner ( Incorrect. Since corporations have a separate legal existence from their owners, they are taxed on their own incomes. ) Instructor Explanation: Most of characteristics of the corporate form stem from the fact that the entity is legally distinct from its owners. Points Received: 1 of 1 Comments: 3. Question: Who has the primary responsibility for the company's financial statements? Your Answer:
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This note was uploaded on 06/20/2010 for the course FINA 6266 taught by Professor Burt during the Spring '10 term at University of Arkansas for Medical Sciences.

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Quiz AC-13 - 1 Question A certain transaction affecting only two accounts causes a liability to increase by a certain amount Which one of the

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