Rachi Is a Wealthy Business Person with Substantial Personal Assets

question 22

Multiple Choice

Rachi is a wealthy business person with substantial personal assets.One of the businesses she carries on is a health club.She has carried on this business as a sole proprietorship, but she has decided to incorporate a corporation under the Canada Business Corporations Act to carry it on.She will be the sole shareholder and director.If you were a client of the health club, which of the following would be a legitimate concern based on the change in the legal status of the health club business?

• A)Management personnel will change.
• B)Standards for cleanliness and service quality will decline.
• C)Prices for annual memberships will go up.
• D)The risk that any claim you might have against the business will not be paid will likely increase.
• E)It will be no use to you to complain to Rachi about any problems you have with the operation of the health club.

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Definitions:

Depreciation

The process of allocating the cost of a tangible or intangible asset over its useful life, reflecting the decrease in value of the asset over time due to use, wear and tear, or obsolescence.

Stock Of Capital Goods

The total quantity of physical assets such as machinery, buildings, and equipment that are used to produce goods and services.

Gross Investment

The total amount spent on purchases of new capital assets plus replacement of depreciated assets.

Depreciation

The gradual decrease in the economic value of the capital stock of a firm, nation, or other entity, either through physical wear and tear or through obsolescence.