Chapter 11, Problem 1QS

To determine

Corporate:

It is the form of business organization in which business has its own separate legal entity. It provides advantage to owner of the business to have limited liability.

To identify: The given statements are true or false.

Explanation of Solution

1.

False.

In corporate form of business, one of the features is that the ownership rights are easily transferrable.

Hence, the given statement is false.

2.

False.

In corporate form of business, one of the features is that the owners have limited liability; it means owners are responsible only up to the amount of their shares invested.

Hence, the given statement is false.

3.

True.

In corporate form of business, capital can be easily accumulated because in this form business can issue unlimited shares.

Hence, the given statement is true.

4.

True.

When dividend is paid, it is paid after payment of tax by company and after its payment as dividend, it becomes income for the shareholder and it taxed again under income tax.

Hence, the given statement is true.

5.

True.

In corporate form of business, business has its own entity according to law, it means owners and business is different.

Hence, the given statement is true.

6.

False.

Corporate form of business is based on going concern assumption; it means it is established for indefinite life.

Hence, the given statement is false.

7.

True.

Directors act as agents of the organization. Hence, it is true that the owners not act as agent fo the corporation.

Hence, the given statement is true.