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 key characteristic that distinguishes a corporation from an individual?

A corporation cannot own property, but an individual can.

A corporation ceases to exist when its owners change, while an individual has perpetual existence.

A corporation has limited liability, while an individual has unlimited liability for personal debts.

A corporation is not subject to taxation, but an individual is.

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Verified step by step guidance

Understand the concept of a corporation: A corporation is a legal entity that is separate from its owners, meaning it can own property, enter into contracts, and be subject to taxation independently of its shareholders.

Compare the liability of a corporation versus an individual: A corporation has limited liability, meaning the shareholders are not personally responsible for the corporation's debts beyond their investment. In contrast, an individual has unlimited liability for personal debts, which means creditors can claim personal assets to settle debts.

Evaluate the statement about ownership of property: A corporation can own property, just like an individual. This statement is incorrect as it misrepresents the legal capacity of a corporation.

Analyze the statement about existence: A corporation has perpetual existence, meaning it continues to exist even if ownership changes. This is different from an individual, whose existence is tied to their lifespan.

Review the taxation statement: Corporations are subject to taxation, just like individuals. However, the taxation mechanisms differ (e.g., corporate tax versus personal income tax). This statement is incorrect as it suggests corporations are not taxed.