WGU D362 CORPORATE FINANCE SECTION1 || WITH 100% ACCURATE SOLUTIONS.
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Course
WGU D362 CORPORATE FINANCE
Institution
WGU D362 CORPORATE FINANCE
Last year, a company filed an income tax return and paid taxes on its net income. From this net income, the company paid cash dividends to its shareholders, who were required to pay taxes on the dividends they received.
Which type of business organization is this company?
S-corporation
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WGU D362 CORPORATE FINANCE SECTION1 || WITH
100% ACCURATE SOLUTIONS.
Last year, a company filed an income tax return and paid taxes on its net income. From this net
income, the company paid cash dividends to its shareholders, who were required to pay taxes on
the dividends they received.
Which type of business organization is this company?
S-corporation
Partnership
C-corporation
Limited liability company (LLC) correct answers A major disadvantage of a C-corporation is
that it must pay taxes on the income it earns. If the corporation pays a cash dividend, the
stockholders must also pay taxes on the dividends they receive. Thus, the owners of C-
corporations are subject to double taxation—first at the corporate level and then at the personal
level when they receive dividends.
What are two key characteristics of an S-corporation? Choose two answers.
Costlier to establish than a sole proprietorship or a partnership
Unlimited number of stockholders
Limited liability of owners
Double taxation correct answers "Costlier to establish than a sole proprietorship or a partnership"
is correct. Starting a corporation is costlier than starting a sole proprietorship. For example, it
requires writing articles of incorporation and by-laws that conform to the laws of the state of
incorporation.
"Limited liability of owners" is correct. A major advantage of a corporation is that stockholders
have limited liability for debts and other obligations. Owners of corporations have limited
liability because corporations are legal persons that take actions in their own names, not in the
names of individual owners.
What are two key characteristics of a C-corporation? Choose two answers.
Inexpensive formation
Access to capital
Unlimited liability of owners
Double taxation correct answers "Access to capital" is correct. Shares in a corporation can be
sold to raise capital from investors who are not involved in the business. This can greatly
increase the amount of capital that can be raised to fund the business.
"Double taxation" is correct. A major disadvantage of a C-corporation is that it must pay taxes on
the income it earns. If the corporation pays a cash dividend, the stockholders must also pay taxes
on the dividends they receive. Thus, the owners of C-corporations are subject to double taxation
—first at the corporate level and then at the personal level when they receive dividends.
A new corporation is being formed, and reporting standards are being considered.
Who reports directly to the owners in this business structure?
Board of directors
Chief financial officer (CFO)
, Audit committee
Chief executive officer (CEO) correct answers Correct:The board of directors is elected by the
shareholders and is responsible to them, not to management.
Who is responsible for preparing a company's financial statements?
The internal auditor
The controller
The treasurer
The external auditor correct answers Answer
Correct:In addition to maintaining the firm's financial and cost accounting systems, preparing
taxes, and working closely with the firm's external auditors, the controller is responsible for
preparing the financial statements.
Which type of business organization is subject to paying taxes on its income, while its
stockholders are also taxed on the dividends?
Partnership
Sole proprietorship
C-corporation
Limited liability corporation (LLC) correct answers Correct:
A major disadvantage of a C-corporation is that it must pay taxes on the income it earns. If the
corporation pays a cash dividend, the stockholders must also pay taxes on the dividends they
receive. Thus, the owners of C-corporations are subject to being taxed twice—first at the
corporate level and then at the personal level when they receive dividends.
Who is responsible for managing a company's insurance portfolio?
The controller
The treasurer
The internal auditor
The risk manager correct answers Correct:
The risk manager is responsible for monitoring and managing the firm's risk exposure in
financial and commodity markets and the firm's relationships with insurance providers.
What is a key difference between C-corporations and S-corporations?
C-corporations can be owned by other types of companies and are easily acquired, while S-
corporations cannot be acquired.
Owners of S-corporations have limited liability, while owners of C-corporations have unlimited
liability.
An S-corporation is the default corporation when articles of incorporation are filed in a state, but
C-corporations require an additional forms.
S-corporations must pay taxes on the income they earn; all profits earned by C-corporations pass
directly to the stockholders. correct answers rrect
Answer
Correct:If an organization has a desire to be bought out by another company, it should form as a
C-corporation to make the future process easier.
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