Jeff Lynne has studied the information you gave him in that exercise and has come to you with more statements about corporation.
1. Corporation management is both an advantage and a disadvantage of a corporation compared
to a proprietorship or a partnership.
2. Limited liability of stockholders, government regulations, and additional taxes are the major
disadvantages of a corporation.
3. When a corporation is formed, organization costs are recorded as an asset.
4. Each share of common stock gives the stockholder the ownership rights to vote at stockholder
meetings, share in corporate earnings, keep the same percentage ownership when
new shares of stock are issued, and share in assets upon liquidation.
5. The number of issued shares is always greater than or equal to the number of authorized
shares.
6. A journal entry is required for the authorization of capital stock.
7. Publicly held corporations usually issue stock directly to investors.
8. The trading of capital stock on a securities exchange involves the transfer of already issued
shares from an existing stockholder to another investor.
9. The market value of common stock is usually the same as its par value.
10. Retained earnings is the total amount of cash and other assets paid in to the corporation by
stockholders in exchange for capital stock.
Instructions
Identify each statement as true or false. If false, indicate how to correct the statement
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