Deck 18: Forms of Businss and Corporate Taxation

Question 1

The ease of transferring ownership is one advantage of the sole proprietorship.​

Answer 1

False

Question 2

If a corporation operates at a loss, the loss may not be used to offset income from other years.​

Answer 2

False

Question 3

The creditors of corporations are equally liable for the debts of the firm.​

Answer 3

False

Question 4

Corporate bylaws specify the relationship between the corporation and the Securities and Exchange Commission.​

Question 5

One major advantage of incorporating is permanence.

Question 6

The corporate income tax rates increase as earnings increase.​

Question 7

Owners in which of the following forms of business have unlimited liability?​

A) ​LLCs
B) corporations​
C) sole proprietorships​
D) limited partnerships​

Question 8

Since a corporation is responsible for its debts, creditors may sue it for payment.​

Question 9

Possible advantages of incorporating include​
1) permanency
2) ease of transferring ownership
3) avoidance of federal taxes

A)​1 and 2
B)1 and 3​
C)2 and 3​
D)1, 2, and 3​

Question 10

If a firm needs additional equity financing through the retention of earnings, it may be advantageous to incorporate.​

Question 11

Partnerships constitute the largest number of firms.​

Question 12

Partnerships pay tax on their earnings at the same rates paid by corporations.​

Question 13

Owners in S corporations or LLCs lack limited liability.​

Question 14

In corporations the stockholders are equally liable for the debts of the firm.

Question 15

Corporate bylaws specify the relationship between the corporation and a state.​

Question 16

Corporations pay a straight 25 percent tax rate on their earnings.​

Question 17

The ease of transferring ownership is one advantage of the publicly held corporation.​

Question 18

Advantages of the corporate form of business include​

A) limited liability for stockholders​
B) avoidance of state taxation​
C) limited life​
D) deductibility of dividends​

Question 19

Stockholders in publicly traded corporations lack limited liability.​

Question 20

Corporate losses can not result in tax refunds.​

Question 21

Corporate losses​

A) ​only offset income from prior years
B) only offset income earned in subsequent years​
C) may not be used to offset income from other years​
D) are carried back and then carried forward​

Question 22

If the federal corporate income tax rate is 30%, what are the taxes owed or refunded for in each of the following years?​ $$\begin{array} { l c c } \text { a. Year } & \text { earnings } & \text { tax } \\& \$ 0 \\1 & 0 & \\2 & ( 30,000 ) & \\3 & 25,000 & \\4 & 10,000 & \\5 & ( 10,000 ) & \\6 & \text { earnings } & \text { tax } \\\text { b. Year } & & \\1 & \$ 5,000 & \\2 & 10,000 & \\3 & ( 5,000 ) & \\4 & 10,000 & \\5 & ( 40,000 ) & \\6 & 30,000 &\end{array}$$ ​

Question 23

Corporate federal income tax rates​

A) ​decrease as income increases
B) are the same for all level of corporate income​
C) phase out the benefits of lower tax brackets as corporate income increases​
D) ​reach a high of 50 percent for earnings over $18,300,000

Question 24

​Using the corporate tax rates provided in the text, what is the corporate income tax paid on earnings of (a) $1,000, (b) $10,000, (c) $100,000, (d) 1,000,000, and (e) 10,000,000?