Which of the Following Statements Describes the Corporate Characteristic Termed

question 148

Multiple Choice

Which of the following statements describes the corporate characteristic termed limited liability?

• A) The liabilities of the corporation cannot be extended to the personal assets of the shareholder.
• B) Shares of stock can be readily bought and sold by investors on the open market.
• C) Shareholders are not authorized to sign contracts or make business commitments on behalf of the corporation.
• D) Corporations pay income tax on corporate earnings, and shareholders pay personal income tax on corporate dividends and gains from sale of stock.

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Definitions:

Period Costs

Expenses that are not directly tied to production activity and are expensed in the period in which they occur.

Prepaids Insurance

Expenses paid in advance for insurance coverage, recognized as assets until the coverage period lapses.

Fixed Manufacturing

Costs that do not vary with the volume of production, including rent, salaries of permanent staff, and equipment depreciation.

Average Costs

Calculated by dividing total costs by the total number of units produced, indicating the cost on a per-unit basis.