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

Which of the following is a primary advantage of organizing a firm as a corporation?

Profits are taxed only once at the shareholder level

Ownership is difficult to transfer

The corporation dissolves automatically upon the death of an owner

Limited liability for shareholders

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Verified step by step guidance

Understand the concept of 'limited liability': In a corporation, shareholders are only liable for the amount they have invested in the company. Their personal assets are protected from the company's debts and legal obligations.

Compare the advantages of a corporation to other business structures: Unlike sole proprietorships or partnerships, corporations provide a shield for shareholders against personal liability for business losses or lawsuits.

Analyze the incorrect options: Profits being taxed only once applies to partnerships or sole proprietorships, not corporations. Ownership being difficult to transfer is not true for corporations, as shares can be bought and sold easily. Corporations do not dissolve automatically upon the death of an owner; they have perpetual existence.

Focus on the correct answer: The primary advantage of organizing a firm as a corporation is the limited liability for shareholders, which ensures their personal assets are not at risk.

Summarize the reasoning: The structure of a corporation is designed to protect shareholders while allowing the business to continue operating independently of individual owners.