Identify the usual liability of stockholders for corporate actions.

Question

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Answer 1

Question

Chapter 11, Problem 1SSQ

To determine

Identify the usual liability of stockholders for corporate actions.

Expert Solution & Answer

Answer to Problem 1SSQ

c. Limited to the amount of their investment in the corporation.

Explanation of Solution

Corporation: A business concern where there is a separate legal entity, and are owned by shareholders, are classified as corporation. Transfer of ownership and raising funds are easy in this form of organization. The liabilities of the stockholders to its creditors are limited up to their invested capital amount in the corporation.

The liability of a corporation is limited. It means that the liability of stockholders is limited only to the extent of their investment amount. This is because, a corporation is a separate legal entity. Thus, the corporation is liable to settle all its debts and obligations from the assets available in the corporation, but not from the personal assets of stockholders.

Justification for incorrect options:

“Option a” is wrong, because stockholders’ liability are limited.

“Option b” is wrong, because stockholders’ liability is not only limited to the par value of the shares held by the shareholders but also for the amount paid for the paid-in capital in excess of par by the shareholders.

“Option d” is wrong, because stockholders’ liability in the corporation is not determined based on the retained earnings, but it is determined based on the amount of investment made by them.

Justification for correct option:

“Option c” is correct, because stockholders’ liability in the corporation is limited to the amount of their investment in the corporation.

Therefore, the correct answer is option c.

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Answer 2

Question

Chapter 11, Problem 1SSQ

To determine

Identify the usual liability of stockholders for corporate actions.

Expert Solution & Answer

Answer to Problem 1SSQ

c. Limited to the amount of their investment in the corporation.

Explanation of Solution

Corporation: A business concern where there is a separate legal entity, and are owned by shareholders, are classified as corporation. Transfer of ownership and raising funds are easy in this form of organization. The liabilities of the stockholders to its creditors are limited up to their invested capital amount in the corporation.

The liability of a corporation is limited. It means that the liability of stockholders is limited only to the extent of their investment amount. This is because, a corporation is a separate legal entity. Thus, the corporation is liable to settle all its debts and obligations from the assets available in the corporation, but not from the personal assets of stockholders.

Justification for incorrect options:

“Option a” is wrong, because stockholders’ liability are limited.

“Option b” is wrong, because stockholders’ liability is not only limited to the par value of the shares held by the shareholders but also for the amount paid for the paid-in capital in excess of par by the shareholders.

“Option d” is wrong, because stockholders’ liability in the corporation is not determined based on the retained earnings, but it is determined based on the amount of investment made by them.

Justification for correct option:

“Option c” is correct, because stockholders’ liability in the corporation is limited to the amount of their investment in the corporation.

Therefore, the correct answer is option c.

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Answer 3

Question

Chapter 11, Problem 1SSQ

To determine

Identify the usual liability of stockholders for corporate actions.

Expert Solution & Answer

Answer to Problem 1SSQ

c. Limited to the amount of their investment in the corporation.

Explanation of Solution

Corporation: A business concern where there is a separate legal entity, and are owned by shareholders, are classified as corporation. Transfer of ownership and raising funds are easy in this form of organization. The liabilities of the stockholders to its creditors are limited up to their invested capital amount in the corporation.

The liability of a corporation is limited. It means that the liability of stockholders is limited only to the extent of their investment amount. This is because, a corporation is a separate legal entity. Thus, the corporation is liable to settle all its debts and obligations from the assets available in the corporation, but not from the personal assets of stockholders.

Justification for incorrect options:

“Option a” is wrong, because stockholders’ liability are limited.

“Option b” is wrong, because stockholders’ liability is not only limited to the par value of the shares held by the shareholders but also for the amount paid for the paid-in capital in excess of par by the shareholders.

“Option d” is wrong, because stockholders’ liability in the corporation is not determined based on the retained earnings, but it is determined based on the amount of investment made by them.

Justification for correct option:

“Option c” is correct, because stockholders’ liability in the corporation is limited to the amount of their investment in the corporation.

Therefore, the correct answer is option c.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 11, Problem 1SSQ

To determine

Identify the usual liability of stockholders for corporate actions.

Expert Solution & Answer

Answer to Problem 1SSQ

c. Limited to the amount of their investment in the corporation.

Explanation of Solution

Corporation: A business concern where there is a separate legal entity, and are owned by shareholders, are classified as corporation. Transfer of ownership and raising funds are easy in this form of organization. The liabilities of the stockholders to its creditors are limited up to their invested capital amount in the corporation.

The liability of a corporation is limited. It means that the liability of stockholders is limited only to the extent of their investment amount. This is because, a corporation is a separate legal entity. Thus, the corporation is liable to settle all its debts and obligations from the assets available in the corporation, but not from the personal assets of stockholders.

Justification for incorrect options:

“Option a” is wrong, because stockholders’ liability are limited.

“Option b” is wrong, because stockholders’ liability is not only limited to the par value of the shares held by the shareholders but also for the amount paid for the paid-in capital in excess of par by the shareholders.

“Option d” is wrong, because stockholders’ liability in the corporation is not determined based on the retained earnings, but it is determined based on the amount of investment made by them.

Justification for correct option:

“Option c” is correct, because stockholders’ liability in the corporation is limited to the amount of their investment in the corporation.

Therefore, the correct answer is option c.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 11, Problem 1SSQ

To determine

Identify the usual liability of stockholders for corporate actions.

Expert Solution & Answer

Answer to Problem 1SSQ

c. Limited to the amount of their investment in the corporation.

Explanation of Solution

Corporation: A business concern where there is a separate legal entity, and are owned by shareholders, are classified as corporation. Transfer of ownership and raising funds are easy in this form of organization. The liabilities of the stockholders to its creditors are limited up to their invested capital amount in the corporation.

The liability of a corporation is limited. It means that the liability of stockholders is limited only to the extent of their investment amount. This is because, a corporation is a separate legal entity. Thus, the corporation is liable to settle all its debts and obligations from the assets available in the corporation, but not from the personal assets of stockholders.

Justification for incorrect options:

“Option a” is wrong, because stockholders’ liability are limited.

“Option b” is wrong, because stockholders’ liability is not only limited to the par value of the shares held by the shareholders but also for the amount paid for the paid-in capital in excess of par by the shareholders.

“Option d” is wrong, because stockholders’ liability in the corporation is not determined based on the retained earnings, but it is determined based on the amount of investment made by them.

Justification for correct option:

“Option c” is correct, because stockholders’ liability in the corporation is limited to the amount of their investment in the corporation.

Therefore, the correct answer is option c.

Answer 6

Chapter 11, Problem 1SSQ

To determine

Identify the usual liability of stockholders for corporate actions.

Expert Solution & Answer

Answer to Problem 1SSQ

c. Limited to the amount of their investment in the corporation.

Explanation of Solution

Corporation: A business concern where there is a separate legal entity, and are owned by shareholders, are classified as corporation. Transfer of ownership and raising funds are easy in this form of organization. The liabilities of the stockholders to its creditors are limited up to their invested capital amount in the corporation.

The liability of a corporation is limited. It means that the liability of stockholders is limited only to the extent of their investment amount. This is because, a corporation is a separate legal entity. Thus, the corporation is liable to settle all its debts and obligations from the assets available in the corporation, but not from the personal assets of stockholders.

Justification for incorrect options:

“Option a” is wrong, because stockholders’ liability are limited.

“Option b” is wrong, because stockholders’ liability is not only limited to the par value of the shares held by the shareholders but also for the amount paid for the paid-in capital in excess of par by the shareholders.

“Option d” is wrong, because stockholders’ liability in the corporation is not determined based on the retained earnings, but it is determined based on the amount of investment made by them.

Justification for correct option:

“Option c” is correct, because stockholders’ liability in the corporation is limited to the amount of their investment in the corporation.

Therefore, the correct answer is option c.

Answer 7

Chapter 11, Problem 1SSQ

To determine

Identify the usual liability of stockholders for corporate actions.

Answer 8

Expert Solution & Answer

Answer to Problem 1SSQ

c. Limited to the amount of their investment in the corporation.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

Corporation: A business concern where there is a separate legal entity, and are owned by shareholders, are classified as corporation. Transfer of ownership and raising funds are easy in this form of organization. The liabilities of the stockholders to its creditors are limited up to their invested capital amount in the corporation.

The liability of a corporation is limited. It means that the liability of stockholders is limited only to the extent of their investment amount. This is because, a corporation is a separate legal entity. Thus, the corporation is liable to settle all its debts and obligations from the assets available in the corporation, but not from the personal assets of stockholders.

Justification for incorrect options:

“Option a” is wrong, because stockholders’ liability are limited.

“Option b” is wrong, because stockholders’ liability is not only limited to the par value of the shares held by the shareholders but also for the amount paid for the paid-in capital in excess of par by the shareholders.

“Option d” is wrong, because stockholders’ liability in the corporation is not determined based on the retained earnings, but it is determined based on the amount of investment made by them.

Justification for correct option:

“Option c” is correct, because stockholders’ liability in the corporation is limited to the amount of their investment in the corporation.

Therefore, the correct answer is option c.