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 disadvantage of a corporation?

Limited ability to raise capital

Double taxation of corporate earnings

Lack of legal entity status

Unlimited liability of shareholders

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Verified step by step guidance

Understand the structure of a corporation: A corporation is a separate legal entity that is distinct from its owners (shareholders). This means it has its own rights and responsibilities under the law.

Review the advantages of a corporation: Corporations typically have limited liability for shareholders, the ability to raise capital through issuing shares, and perpetual existence.

Analyze the disadvantages of a corporation: One key disadvantage is double taxation. This occurs because corporate earnings are taxed at the corporate level, and then dividends distributed to shareholders are taxed again at the individual level.

Eliminate incorrect options: 'Limited ability to raise capital' is incorrect because corporations generally have a strong ability to raise capital. 'Lack of legal entity status' is incorrect because corporations are recognized as separate legal entities. 'Unlimited liability of shareholders' is incorrect because shareholders have limited liability.

Conclude that the correct disadvantage is 'Double taxation of corporate earnings,' as this is a unique challenge faced by corporations compared to other business structures.