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FAC1601 Assignment 3 Second Semester 2022
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This document contains workings and solutions for assignment 3 of second semester 2022. Contact me should you encounter any challenges
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FAC1601ASSIGNMENT 3
SECOND SEMSTER 2022
BY: MTHOMBENI : 0767297208
1
,Question 1
Marked out of 2.00
Question text
A close corporation is a legal entity, which implies that it is not liable to pay for obligations and can acquire
assets in its own name.
a. True
b. False
Question 2
Marked out of 2.00
Question text
Which one of the following alternatives is correct?
a. A close corporation is taxed 50% of the profits separately from its members and the other half is taxed
directly on the members in their personal capacity
b. A close corporation is taxed separately from its members only during its last year of operation
c. A close corporation is not taxed separately from its members as members are liable for the entity’s tax in their
individual capacity based on the balance of individual loans they owe to the entity
d. A close corporation is taxed separately from its members
Question 3
Marked out of 2.00
Question text
Which one of the following alternatives is incorrect?
a. A close corporation can enter into contracts and cannot be sued as a legal person in its own right.
b. A close corporation continues to exist under its registered name irrespective of a change in its membership.
c. A close corporation can have up to ten natural persons as members.
d. A close corporation may give financial assistance to a person to acquire an interest in the close corporation.
2
, Question 4
Marked out of 2.00
Question text
Which one of the following alternatives is correct?
a. The liability of a member for the obligations of the close corporation is limited to the extent of the
member's contribution to the close corporation.
b. The liability of a member for the obligations of the close corporation is limited to the extent of the member's
contribution to the close corporation less distributions already paid to the members.
c. The liability of a member for the obligations of the close corporation is limited to the extent of the member's
contribution to the close corporation and members’ loans advanced to the business.
d. The liability of a member for the obligations of the close corporation is limited to the extent of the member's
contribution of the least active members in the close corporation.
Question 5
Marked out of 2.00
Question text
Which one of the following alternatives is correct journal entry to record income tax expense for a close
corporation?
a. Debit “Bank” asset and Credit “SARS (income tax)” liability
b. Credit “Bank” asset and Debit “SARS (income tax)” liability
c. Debit “Income tax expense” profit or loss and Credit “SARS (income tax)” liability
d. Credit “Income tax expense” profit or loss and Debit “SARS (income tax)” liability
Question 6
Not yet answered
Marked out of 2.00
Question text
Which one of the following alternatives is false regarding the loans advanced to the members of the close
corporation?
a. Interest on loans to members of the close corporation’s may not be charged if the loan is advanced 1 month
before the close corporation’s financial year end.
b. If the terms of the loan is that interest is capitalised, the interest correctly calculated should be added to the
loan capital to increase the balance owing to the close corporation.
3
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