Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Characteristics of a Corporation

Financial Accounting

12. Stockholders' Equity

Characteristics of a Corporation

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Multiple Choice

All of the following are advantages of a corporation except:

Ability to raise large amounts of capital

Profits are taxed only once at the shareholder level

Limited liability for shareholders

Continuous existence regardless of ownership changes

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Verified step by step guidance

Step 1: Understand the concept of a corporation. A corporation is a legal entity that is separate from its owners (shareholders). It has distinct characteristics such as limited liability, ability to raise capital, and continuous existence.

Step 2: Analyze the advantages of a corporation. These include: (a) Limited liability for shareholders, meaning shareholders are not personally liable for the corporation's debts; (b) Ability to raise large amounts of capital through issuing shares; and (c) Continuous existence, meaning the corporation continues to exist even if ownership changes.

Step 3: Recognize the disadvantage of a corporation. One key disadvantage is double taxation. Profits are taxed at the corporate level and again at the shareholder level when dividends are distributed.

Step 4: Compare the options provided in the question. Identify which statement does not align with the advantages of a corporation. The statement 'Profits are taxed only once at the shareholder level' is incorrect because corporations face double taxation.

Step 5: Conclude that the correct answer is the statement that does not represent an advantage of a corporation, which is 'Profits are taxed only once at the shareholder level.'