Concept explainers
Income taxes are a unique expense of the corporate form of business.
Indicate whether the given statement is true or false.
Answer to Problem 1TF
The given statement is true.
Explanation of Solution
Corporation: The form of business entity ,which is incorporated by state law into a separate legal entity, owned by stockholders, and managed by board of directors elected by stockholders, is referred to as corporation.
Description: Corporate form of organizations incur income tax expense but the sole proprietorships and partnerships do not. Corporation has to pay tax because it is recognized as a separate taxable unit. Stockholders also pay the taxes on their share of earnings from the business. Proprietors or owners pay tax on the earnings from the sole proprietorship business. Similar to sole proprietors, partners pay tax on their share of partnership earnings. Hence, the statement is true.
Thus, the given statement is true, in stating that the income tax expense is unique for a corporate form of business organization.
Want to see more full solutions like this?
Chapter 21 Solutions
College Accounting, Chapters 1-27
- Corporate taxable income is based on an income statement that is similar to income statements prepared for financial reporting. It has Revenues less expenses equals income. How is the computation for personal taxable income different from this income statement concept? Why do you think these differences exist?arrow_forwardWhich of the following is not something that corporations can do with their profits? a. Pay income tax to the government b. They can do all of these. c. Pay them to shareholders d. Hold profits within the firmarrow_forwardPass through. If the corporation is structured as an S corporation, profits and losses are well-versed to the shareholders, in order that the corporation doesn't pay financial gain taxes. Can you help me understand what that is, with details?arrow_forward
- Define the term Corporate taxable income?arrow_forwardDefine the meaning of business taxation. Define the meaning of Withholding Tax on Compensation.arrow_forwardCorporations are required to pay taxes on O A. income from the business O B. operating expenses C. employee bonuses O D. start-up costsarrow_forward
- Indicate whether the following statements are true or false. If the statementis false, explain why.d. The Tax Code encourages companies to pay a large percentage of theirnet income in the form of dividends.arrow_forwardWhich of the following are not taxdeductible items to a corporation? interest expenses marketing expenses dividends interest expenses and marketing expenses interest expenses , marketing expenses, and dividendsarrow_forwardWhat is corporate income tax and value added tax and its use?arrow_forward
- There are two basis of accounting: cash basis and accrual basis. Personal finance often focuses on the cash basis, whereas corporate accounting focuses on the accrual basis, as prescribed by U.S. Generally Accepted Accounting Principles (GAAP). Furthermore, tax filers focus on the modified accrual basis. If you were about to select the basis of accounting for your organization, which basis would you select, and why?arrow_forwardHow can we determine the corporate taxable income?arrow_forwardWhy company tax rate is always different from company accounting income?arrow_forward
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
- Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage