ACCT110 Chapter 8

The term "double taxation" refers to which of the following?

Corporations must pay income taxes on their net income, and their stockholders must pay income taxes on their dividends.

Indicate whether these are true or false statements. Limited liability is a benefit to both corporations and partnerships, but not to sole proprietorships.

FALSE

Indicate whether these stockholder statements are true or false. Preferred stockholders generally have a preference to dividends

FALSE

Define sole proprietorship

A business owned by one person

What is meant by "double taxation/" Which type of organizational form is more likely to be subject to double taxation?

Corporations - Corporations must pay income taxes on their net income, and their stockholders must pay income taxes on their dividends.

Indicate whether these stockholder statements are true or false. Preferred stockholders generally have no preference to assets when the company is liquidated

FALSE - they have preference

Indicate whether these stockholder statements are true or false. Preferred stock carries voting rights that give the preferred stockholders greater power in the corporations decision making process than common stockholders have

False

Which of the following statements about types of business entities is true?

One advantage of a corporations is ability to raise capital they issue common stock

Indicate whether these are true or false statements. a sole proprietorship is an accounting entity separate from its owner

TRUE

Indicate whether these stockholder statements are true or false. Preferred stockholders generally receive a set or fixed amount of dividends

TRUE !

Indicate whether these are true or false statements. Double taxation refers to the fact that both a partnership and its partners must pay income tax on the earnings of the partnership.

TRUE.

Indicate whether these are true or false statements. Sole proprietorships are, generally, subject to fewer governmental regulations than corp.

TRUE..

Which of the following is not normally a preferences given to the holders of preferred stock?

The right to vote before the common stockholders at the corporation's annual meetings common stock = voting

When would you want to open a "Line of Credit"?

To cover expenses you didn't account for like a loan. predetermined amount that the bank/credit union will loan you

Indicate whether these are true or false statements. Unlike a partnership, a corporation is not terminated when a major stockholder withdraws his or her investment

True.

Define partnership

a business owned by two or more people

Define corporation

business owned by investors

Which of the following is not considered an advantage of the corporate form of business organization? a.ability to raise capital b.continuity of existence c.ease of transferability of ownership d.lack of government regulation

d. Lack of government regulation

Which of the following is not a reason why a corporation may choose to not pay dividends? a.The board and management prefer to reinvest all net income for future growth b. the corporation does not have adequate cash c. the corporation doesn't have adequate retained earnings. d.All of these are reasons are valid

d.All of these are reasons are valid