When a business is organized as a corporation, which of thefollowing statements is true?a. Stockholders are liable for the debts of the businessin proportion to their percentage ownership of capitalstock.b. Stockholders do not have to pay personal income taxes on dividends received, because the corporation is sub-ject to income taxes on its earnings. c. Fluctuations in the market value of outstanding shares of capital stock do not affect the amount of stockhold-ers’ equity shown in the balance sheet. d. Each stockholder has the right to bind the corporationto contracts and to make other managerial decisions.
When a business is organized as a corporation, which of thefollowing statements is true?a. Stockholders are liable for the debts of the businessin proportion to their percentage ownership of capitalstock.b. Stockholders do not have to pay personal income taxes on dividends received, because the corporation is sub-ject to income taxes on its earnings. c. Fluctuations in the market value of outstanding shares of capital stock do not affect the amount of stockhold-ers’ equity shown in the balance sheet. d. Each stockholder has the right to bind the corporationto contracts and to make other managerial decisions.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
When a business is organized as a corporation, which of the
following statements is true?
a. Stockholders are liable for the debts of the business
in proportion to their percentage ownership of capital
stock.
b. Stockholders do not have to pay personal income taxes
on dividends received, because the corporation is sub-
ject to income taxes on its earnings.
c. Fluctuations in the market value of outstanding shares
of capital stock do not affect the amount of stockhold-
ers’ equity shown in the
d. Each stockholder has the right to bind the corporation
to contracts and to make other managerial decisions.
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