FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
When a business is organized as a corporation, which of the
following statements is true?
a. Stockholders are liable for the debts of the business
in proportion to their percentage ownership of capital
stock.
b. Stockholders do not have to pay personal income taxes
on dividends received, because the corporation is sub-
ject to income taxes on its earnings.
c. Fluctuations in the market value of outstanding shares
of capital stock do not affect the amount of stockhold-
ers’ equity shown in the
d. Each stockholder has the right to bind the corporation
to contracts and to make other managerial decisions.
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- Which one of the following is not an ownership right of a stockholder in a corporation? * To vote in the election of directors To declare dividends on the common stock O To share in assets upon liquidation O To share in corporate earningsarrow_forwardWhich of the following is true of a "Subchapter S Corporation"? The corporation is subject to double taxation. O The company is not really a corporation so it is not a separate entity from the stockholders and does not file a tax return. The owners' personal assets are protected from customers and creditors. O Tax on the business income of the company is paid only by the business. O Owners of the equity of this business are called "debtors".arrow_forwardWhich of the following is not a characteristic of a corporation? a.Corporations experience an ease in obtaining large amounts of resources by issuing stock. b.Corporations are organized as a separate legal taxable entity. c.Ownership is divided into shares of stock. d.A corporation's resources are limited to its individual owners' resources.arrow_forward
- An individual provides accounting services to a corporation in exchange for stock. the shareholder must recognize income and the corporation may deduct or capitalize the expenditure as would be deemed appropriate. A. True B. Falsearrow_forwardWhich of the following is a disadvantage of the corporate form of organization? difficulty in raising capital unlimited liability of the owners finite life of the organization the tax treatment of dividendsarrow_forward(Multiple Choice) A corporation can only pay dividends to shareholders from its: 1. Legal Capital 2. Authorized Shares 3. Retained Earnings 4. Contributed Capital 5. Share Capitalarrow_forward
- T2. stock holders are not liable for a corporation's actions or debt true or falsearrow_forwardA corporation may not deduct dividends paid to shareholders but is permitted to deduct reasonable compensation? True or Falsearrow_forwardWhich feature is not applicable to common stock ownership?a. Right to receive dividends before preferred stockshareholders.b. Right to vote on appointment of external auditor.c. Right to receive residual assets of the company shouldit cease operations.d. All of the above are applicable to common stockownership.arrow_forward
- 1. Which one of the following statements concerning a sole proprietorship is correct? The proprietorship pays taxes at the corporate tax rate. а. b. The ownership of the firm is easy to transfer to another individual. The ability to raise capital is limited by the owner's personal wealth. The company must pay income taxes separate from the taxes paid by the owner. с. d.arrow_forwardWhich of the following represents one of the basic rights of stockholders? a. Stockholders may sell their stock back to the company if they wish. b. Stockholders may authorize a business contract on behalf of the corporation. c. Stockholders may determine at what price the company issues stock. d. Stockholders may participate in management by voting on corporate matters.arrow_forward24) When attempting to raise cash, a company may find it more advantageous to issue bonds rather than common stock shares because of the tax advantage. TRUE FALSEarrow_forward
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