Exam 28: Forms of Business Organization

Shareholders report and pay income tax on dividends received from a corporation.

An S corporation may have a maximum of ________ stockholders.

Assets contributed to a partnership by a partner would be recorded at:

When a sole proprietorship incorporates,the assets of the new business are recorded at cost.

The net income of a sole proprietorship should compensate the owner for all of the following except:

Partner A earns $68,000 from a partnership.Partner B earns $57,000,but withdraws only $49,000.How much must Partner B report in his income tax return as income?

In a limited liability partnership,a partner has unlimited liability for his own actions and limited liability for the actions of his partners.

Sally Smythe enters into a partnership by contributing the following: Cash $15,000;Accounts Receivable $4,500;Machinery which cost $3,000 and has a fair market value of $2,125;and accounts payable of $1,200.What amount will be recorded in her capital account?

The retained earnings account of Company XYZ has a balance of $350,000 at the end of 2017.At the end of 2018 the following information is available. What is the amount of retained earnings at the end of 2018?

When evaluating the liquidity of a proprietorship,creditors will likely base their decision on:

The adjusting entry to recognize income taxes due on a profit of $100,000 and a tax rate of 40% is:

Limited personal liability is a characteristic of a sole proprietorship.

"Double taxation" means:

Sue and Al form a partnership.Sue invests $20,000 and Al invests $25,000.In the first year the partnership earns $60,000.Sue withdraws $7,500 and Al withdraws $12,000.Each receives a salary of $15,000 and the remainder is divided 60% to Al and 40% to Sue.Prepare a schedule showing the capital accounts for Sue and Al.

A corporation is a legal entity that may enter into contracts,may sue or be sued,and is responsible for its own debts.

Closely held corporations have the same ability to qualify for credit sources as publicly traded corporations.

Retained earnings are a fund of cash the business has earned from profitable operations.

Salary allowances to partners when dividing net income:

Grey,Dailey,and Sanders have formed a partnership.Net income for the first year amounted to $50,400.The partnership agreement states that Grey will receive a salary of $10,000,Dailey will receive $15,000,and Sanders will receive $20,000.They each have capital accounts of $30,000,$40,000,and $50,000 respectively.The contract calls for interest of 12% of the beginning capital balances for each partner.Any profit or loss will be split equally.How much income will each partner receive?

Stewart and Brooke form a partnership.Stewart invests $80,000 and Brooke invests $120,000.If there are any profits or losses they will share them as follows: They will each receive a salary of $25,000. Any remaining amount will be allocated ¾ to Brooke and ¼ to Stewart. (1)If the partnership income for the year is $115,000,what amount will be allocated to Brooke? (2)If the partnership income for the year is $125,000,what amount will be allocated to Stewart? (3)If the partnership income for the year is $45,000,what amount will be allocated to Stewart and what amount to Brooke?