Which of the following is true of a corporation?

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CHAPTER 13 26. Which of the following is true of a corporation? A) A corporation cannot be privately hold. B) The earnings of
31. The following information is from the December 31, 2018 balance sheet of Millner. Corporation Preferred Stock, $100 par P

Answer

26. Answer: B) The earnings of a corporation may be subject to double taxation.

The earnings of a corporation may be subject to double taxation once when the corporate profits are taxed and a second time when the dividends distributed are taxed in the hands of the stockholders. Hence, option B) is true of a corporation.

Options A), C), and D) are not true of a corporation since it can be privately held, has a continuous, unlimited life and the stockholders do not have unlimited liability for the corporation’s debt.

27. Answer: C) Stockholders are not authorized to sign contracts or make business commitments on behalf of the corporation.

Corporations function through employees designated as managers and officers who can bind a corporation by signing contracts. The stockholders however lack mutual agency as they cannot bind a corporation to any contract as they are not authorized to sign on behalf of the corporation.

28. Answer: D) Earnings of a corporation may be subject to double taxation.

The earnings of a corporation may be subject to double taxation once when the corporate profits are taxed and a second time when the dividends distributed are taxed in the hands of the stockholders.

29. Answer: A) Cash is debited for $850, and Common Stock-$0.05 Par Value is credited for $850.

The journal entry for cash received from the issuing of common stock at par value will debit cash account for 17000 x $0.05 = $850 and credit the common stock account for $850. Hence, option A) is the correct answer.

Per Chegg guidelines, the first 4 MCQs have been answered. Please post the remaining separately. Thank you.

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