Which of the Following Statements Is CORRECT

question 37

Multiple Choice

Which of the following statements is CORRECT?

• A) In a regular partnership, liability for other partners' misdeeds is limited to the amount of a particular partner's investment in the business.
• B) Attracting large amounts of capital is more difficult for partnerships than for corporations because of such factors as unlimited liability, the need to reorganize when a partner dies, and the illiquidity (difficulty buying and selling) of partnership interests.
• C) A slow-growth company, with little need for new capital, would be more likely to organize as a corporation than would a faster growing company.
• D) The limited partners in a limited partnership have voting control, while the general partner has operating control over the business.Also, the limited partners are individually responsible, on a pro rata basis, for the firm's debts in the event of bankruptcy.
• E) A major disadvantage of all partnerships compared to all corporations is the fact that federal income taxes must be paid by the partners rather than by the firm itself.

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Definitions:

Bond Interest Expense

The cost a company incurs for borrowing money through issuing bonds, represented as interest payments to bondholders.

Annual Interest

The interest amount accumulated over one year on borrowed funds or investments.

Effective-Interest Method

A way of calculating the amortized cost of a bond and the amount of interest expense over its life, reflecting the constant rate of interest over the period.

Bond Discount Amortization

The process of gradually writing off the discount on a bond over the life of the bond, reflecting the increase in its value as it nears maturity.