Wgu D362 Corporate Finance section1 Questions with 100% Verified Correct Answers 2024/2025
Last year, a company filed an income tax return and paid taxes on its net income. From this net income, the company paid cash dividends to its shareholders, who were required to pay taxes on the dividends th...
Wgu D362 Corporate Finance section1
Questions with 100% Verified Correct Answers
2024/2025
Last year, a company filed an income tax return and paid taxes on its net income. From this net
income, the company paid cash dividends to its shareholders, who were required to pay taxes on the
dividends they received.
Which type of business organization is this company?
S-corporation
Partnership
C-corporation
Limited liability company (LLC) - Correct Answer A major disadvantage of a C-corporation is that it
must pay taxes on the income it earns. If the corporation pays a cash dividend, the stockholders must
also pay taxes on the dividends they receive. Thus, the owners of C-corporations are subject to
double taxation—first at the corporate level and then at the personal level when they receive
dividends.
What are two key characteristics of an S-corporation? Choose two answers.
Costlier to establish than a sole proprietorship or a partnership
Unlimited number of stockholders
Limited liability of owners
Double taxation - Correct Answer "Costlier to establish than a sole proprietorship or a partnership" is
correct. Starting a corporation is costlier than starting a sole proprietorship. For example, it requires
writing articles of incorporation and by-laws that conform to the laws of the state of incorporation.
"Limited liability of owners" is correct. A major advantage of a corporation is that stockholders have
limited liability for debts and other obligations. Owners of corporations have limited liability because
corporations are legal persons that take actions in their own names, not in the names of individual
owners.
What are two key characteristics of a C-corporation? Choose two answers.
Inexpensive formation
Access to capital
Unlimited liability of owners
Double taxation - Correct Answer "Access to capital" is correct. Shares in a corporation can be sold to
raise capital from investors who are not involved in the business. This can greatly increase the
amount of capital that can be raised to fund the business.
, "Double taxation" is correct. A major disadvantage of a C-corporation is that it must pay taxes on the
income it earns. If the corporation pays a cash dividend, the stockholders must also pay taxes on the
dividends they receive. Thus, the owners of C-corporations are subject to double taxation—first at
the corporate level and then at the personal level when they receive dividends.
A new corporation is being formed, and reporting standards are being considered.
Who reports directly to the owners in this business structure?
Board of directors
Chief financial officer (CFO)
Audit committee
Chief executive officer (CEO) - Correct Answer Correct:The board of directors is elected by the
shareholders and is responsible to them, not to management.
Who is responsible for preparing a company's financial statements?
The internal auditor
The controller
The treasurer
The external auditor - Correct Answer Answer
Correct:In addition to maintaining the firm's financial and cost accounting systems, preparing taxes,
and working closely with the firm's external auditors, the controller is responsible for preparing the
financial statements.
Which type of business organization is subject to paying taxes on its income, while its stockholders
are also taxed on the dividends?
A major disadvantage of a C-corporation is that it must pay taxes on the income it earns. If the
corporation pays a cash dividend, the stockholders must also pay taxes on the dividends they receive.
Thus, the owners of C-corporations are subject to being taxed twice—first at the corporate level and
then at the personal level when they receive dividends.
Who is responsible for managing a company's insurance portfolio?
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