Business College

Indicate whether each of the following statements is true or false. If false, indicate how to correct the statement. 1. Similar to partners in a partnership, shareholders of a corporation have unlimited liability. 2. It is relatively easy for a corporation to obtain capital through the issuance of shares. 3. The separation of ownership and management is an advantage of the corporate form of business. 4. The journal entry to record the authorization of ordinary shares includes a credit to the appropriate share capital account.​

Answers

Answer 1

Answer:

False

True

True

False

Explanation:

1. False:

Limited Liability (LLC) means if the company failed, investors can't go after the personal money of the owner

Shareholders of a corporation are not like partners in a partnership because they are not personally responsible for all the debts of the corporation.

Shareholders of a corporation do not have unlimited liability.

One of the main advantages of a corporation is limited liability, which means that the shareholders are typically not personally liable for the debts and obligations of the corporation.

Their liability is limited to the amount they have invested in the corporation.

2. True: A corporation can easily get money by selling shares of stock

can do it thru a stock market like new york stock exchange or chicago board of trade or

can do it 1 on 1 with the help of lawyers

It's easier because its neater & safer because you're incorporating thru the state you're living in . the shares almost act like receipt . it's not like selling something for cash where there is no oversight

3. True

an owner can hire people that are better than him in running the company & it could free the owner up to do other things

shareholders are the real owners who can elect a board of directors to oversee the management of the company : can take advantage of crowd think

can have management & scalability, as ownership can be easily transferred through the buying and selling of shares.

4. False: When a corporation says it can sell more shares, it doesn't mean they get money right away, it just means they have permission to sell more shares if they need to later, like having your parents say you can have more cookies if you want them.

journal entry to record the authorization of ordinary shares typically does not involve a credit to the share capital account. When shares are authorized, there is no immediate impact on the company's financial statements. Instead, it is recorded in the corporate records and may be disclosed in the notes to the financial statements. If the shares are subsequently issued and sold, the journal entry would involve a debit to cash or another asset account, and a credit to the share capital account

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