chapter 10 quiz conceptual

1. In a sole proprietorship or partnership, who is personally liable for the company's debts?

• A. Only the business, never the owners
  

• B. Owners, but only for the amount they invested

• C. Owners, even beyond their investment

• D. No one is liable for debts

2. Which of the following is true about a corporation?

• A. It is not legally separate from its owners

• B. It does not pay income taxes

• C. It is legally separate and pays its own taxes

• D. Owners are personally liable for debts

3. What is authorized stock?

• A. Stock that is repurchased by the company

• B. The number of shares the company is legally allowed to issue

• C. Stock that has been issued and sold to investors

• D. The number of shares paid for in full

4. Par value has which type of relationship to the market value of stock?

• A. Direct

• B. Inverse

• C. there is no meaningful relationship between the two

• D. Constant

5. When a company issues stock above par value, the excess is credited to:

• A. Common Stock

• B. Dividends Payable

• C. Treasury Stock

• D. Additional Paid-in Capital

6. Retained earnings represent:

• A. Cash held by the company

• B. Earnings distributed to stockholders

• C. Total revenue minus expenses

• D. Earnings not distributed as dividends