Reference no: EM133176578

QUESTION 1

A bond is:

an ownership interest in a corporation that gives the owner preferences with respect to the assets of the corporations and dividends paid by the corporation.

a debt instrument that allows the holder to convert the debt into a number of shares in the corporation having a value equal to the amount of the bond.

a debt instrument that requires the corporation to pay the holder a stated amount of interest for a stated period of time and then to pay the holder the amount of the bond.

an ownership interest in the corporation that allows the holder to vote in corporate elections.

QUESTION 2

Dividends paid to shareholders by corporations are paid from profits of the corporation after the corporation has paid income taxes on those profits. When a shareholder receives a dividend, that dividend is taxable income to that shareholder. These income tax consequences are known as:

dividend taxation.

corporate taxation.

double taxation.

retained earnings taxation.

QUESTION 3

If an employee of a corporation, while carrying out the duties of their job, does something that causes injury or damage to a third party, the corporation will be liable for those injuries or damage under the doctrine of:

unlimited liability.

centralized management.

respondeat superior.

ultra vires.

QUESTION 4

If a corporation is unable to pay all of its debts, its shareholders:

have limited liability and are not legally responsible for the unpaid debts of the corporation.

are responsible for paying a percentage of the unpaid debts of the corporation that is equal to their percentage ownership of stock in the corporation.

are personally responsible for all of the unpaid debts of the corporation.

are required to sell their stock in the corporation and use the proceeds of the sales to pay the debts of the corporation.

QUESTION 5

With respect to the formation of a corporation, a subscriber is:

a person who has purchased stock in a newly formed corporation.

a person who has offered to purchase a specific number of shares in a corporation that is to be formed.

a person who has expressed an interest in purchasing stock in a corporation that is to be formed but who has not committed to the number of shares to be purchased.

a person who begins the process of forming a new corporation.

QUESTION 6

Can a corporation that is incorporated in one state do business in other states?

No, a corporation can only do business in the state where it is incorporated.

Yes, a corporation can do business in states where it is not incorporated by obtaining a certificate of authority in states where it is not incorporated.

Yes, a corporation can do business in a state where it is not incorporated, but it must re-incorporate in states where it was not originally incorporated.

Yes, a corporation can do business in a state where it is not incorporated, but it must use another name in a state where it is not incorporated.

QUESTION 7

Shares of stock in a corporation that is issued to a shareholder for less than the market value of the stock is:

watered stock.

no-par stock.

par-value stock.

a stock warrant.

QUESTION 8

Shareholders in a corporation elect __________ who are responsible for the overall management of the corporation.

officers

promoters

directors

incorporators

QUESTION 9

__________ represent ownership interests in a corporation.

Debt securities

Equity securities

Subscription agreements

Tender offers

QUESTION 10

If a shareholder sells his or her stock in a corporation, what is the effect of that sale on the corporation?

The corporation has to be reorganized to include the new shareholders.

There is no effect on the corporation.

The existence of the corporation ends, and a new corporation must be created.

The sale is not effective to transfer the stock to the other party to the sale.

QUESTION 11

One of the negative aspects of the corporate form of doing business is double taxation, which occurs when a corporation pays dividends to shareholders from profits that have already been taxed and the dividends, when received by shareholders, are taxed again. How does the use of a subchapter S corporation address the issue of double taxation?

QUESTION 12

What is the difference between a de jure corporation and a de facto corporation, and what is necessary to form each?