B. Management discussion and analysis G. Assets
C. Annual report H. Liabilities
D. Sole proprietorship I. Expenses
E. Dividends J. Investing activities
____ 1. Distributions of cash from a corporation to its stockholders.
____ 2. Consumed assets or services.
____ 3. Ownership is limited to one person.
____ 4. Officers and others who manage the business.
____ 5. Creditor claims against the assets of the business.
____ 6. A separate legal entity under state laws.
____ 7. A report prepared by management that presents financial information.
____ 8. A section of the annual report that presents management’s views.
____ 9. Future economic benefits.
____ 10. Involves acquiring the resources necessary to run the business.
Ans: N/A, LO: 1,2,3, Bloom: K, Difficulty: Easy, Min: 5, AACSB: None, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: None, IMA: Reporting
Answers to Matching
1. E 6. F
2. I 7. C
3. D 8. B
4. A 9. G
5. H 10. J
SHORT-ANSWER ESSAY QUESTIONS
S-A E 226
What are the advantages to a business of being formed as a corporation? What are the disadvantages?
Ans: N/A, LO: 1, Bloom: K, Difficulty: Easy, Min: 3, AACSB: Communication, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: Communications, IMA: Business Economics
Solution 226
Advantages of a corporation are limited liability (stockholders are not personally liable for corporate debts), easy transferability of ownership, and easier to raise funds. Disadvantages of a corporation are increased taxation and government regulations.
S-A E 227
Why would it be safer for a wealthy individual to set up his or her business as a corporation rather than as a proprietorship or partnership?
Ans: N/A, LO: 1, Bloom: C, Difficulty: Easy, Min: 3, AACSB: Communication, AICPA BB: Legal/Regulatory Perspective, AICPA FC: Reporting, AICPA PC: Communications, IMA: Business Economics