Chapter 2 Lab SB
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Middlesex County College *
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Course
ACC-206
Subject
Law
Date
Feb 20, 2024
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doc
Pages
2
Uploaded by stephbordenabe
Chapter 2 Lab Name Stephanie Bordenabe
Problem 1
Which of the following apply/applies to a proprietorship?
Answer
Put an ”X” next to those that apply.
Limited liability of owner
X
In accounting, owner and business are separate
X
By law, owner and business are not separate
Owner can be paid a wage or salary
X
Income tax on business profits are paid by the owner
X
Owner must pay income tax on withdrawal of $90,000
X
Business profit is reported on Form 1040, Schedule C
X
Owner pays a self-employment tax on business profit
Problem 2
An incorporator files articles of incorporation with the state's secretary of state office. The stock entries
on the form are 50,000 shares of common stock and 10,000 shares of preferred stock. What is the number
of shares for each of the following items?
Answers
60000
Capital stock
50000
Common stock authorized
10000
Preferred stock authorized
0
Common stock issued
0
Preferred stock issued
Problem 3
A corporation has the following business results: Sales $100,000; nontaxable dividend income $20,000;
rental income $10,000; business expenses of $60,000. What is its taxable income?
$50,000 is taxable income
Problem 4
Which of the following will pay income tax on the profits of a business?
Answers
Mark with an “X” if the answer applies
X
Corporation qualified under Subchapter C
Corporation qualified under Subchapter S X
General partner X
Limited partner X
Proprietorship Problem 5
Decide whether each of the following statements is true or false.
Answers
False
1.
A well-prepared and in-depth feasibility study ensures success for a business.
False
2.
The owner of a proprietorship is legally entitled to a fair wage.
False 3.
A proprietorship may have one or more owners.
False
4.
A partnership is a legally incorporated business.
False
5.
A partnership pays its own tax on its own profits.
False
6.
A corporation may have an unlimited number of partners.
False
7.
The shareholders of an S corporation are liable for its debts.
False
8.
Preferred stock is not a capital stock.
False 9.
An LLC is not a separate legal entity.
False
10.
An LLC is formed under federal statute.
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