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

In a corporation, shareholders' liability is:

limited to the amount they invested in the corporation

shared equally among all shareholders regardless of investment

unlimited and extends to their personal assets

determined by the corporation's board of directors

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Verified step by step guidance

Understand the concept of shareholders' liability in a corporation. Shareholders are the owners of the corporation, but their liability is typically limited due to the corporate structure.

Learn about the principle of 'limited liability.' In a corporation, shareholders are only responsible for the debts and obligations of the corporation up to the amount they have invested. This means their personal assets are protected.

Compare the options provided in the problem. Analyze each statement to determine which aligns with the principle of limited liability: (1) limited to the amount they invested in the corporation, (2) shared equally among all shareholders regardless of investment, (3) unlimited and extends to their personal assets, (4) determined by the corporation's board of directors.

Eliminate incorrect options. For example, liability is not shared equally among shareholders regardless of investment, nor is it unlimited and extending to personal assets. The board of directors does not determine liability; it is a legal principle inherent to the corporate structure.

Conclude that the correct answer is the option stating 'limited to the amount they invested in the corporation,' as this reflects the principle of limited liability in a corporate structure.