Which of the Following Statements Is CORRECT

question 30

Multiple Choice

Which of the following statements is CORRECT?

• A) Most businesses (by number and total dollar sales) are organized as partnerships or proprietorships because it is easier to set up and operate in one of these forms rather than as a corporation.However, if the business gets very large, it becomes advantageous to convert to a corporation, mainly because corporations have important tax advantages over proprietorships and partnerships.
• B) Due to limited liability, unlimited lives, and ease of ownership transfer, the vast majority of U.S.businesses (in terms of number of businesses) are organized as corporations.
• C) Most business (measured by dollar sales) is conducted by corporations in spite of large corporations' often less favorable tax treatment, due to legal considerations related to ownership transfers and limited liability.
• D) Large corporations are taxed more favorably than sole proprietorships.
• E) Corporate stockholders are exposed to unlimited liability.

Comprehend the concept and application of accrual accounting versus cash basis accounting.

Describe the purpose of adjusted and unadjusted trial balances and their roles in preparing financial statements.

Differentiate between the various types of adjusting entries: prepaid expenses, unearned revenues, accrued revenues, and accrued expenses.

Calculate and interpret a company's profit margin ratio.

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Definitions:

Store Equipment

The fixtures and tools used in a retail store to display and manage products, excluding inventory.

Owners' Claims

Owners' claims refer to the interests or rights of ownership that shareholders or proprietors have in a company, including profits and assets.

Business Assets

Resources owned by a business that have economic value and can contribute to future profits, such as equipment, inventory, and patents.

Basic Accounting Equation

An equation that represents the relationship between assets, liabilities, and owner's equity; Assets = Liabilities + Owner's Equity.