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Student Answer: One of the disadvantages of incorporating a business is that the owners then become subject to liabilities in the event the firm goes bankrupt. Sole proprietorships are subject to more regulations than corporations. In any type of partnership, every partner has the same rights, privileges, and liability exposure as every other partner. Sole proprietorships and partnerships generally have a tax advantage over many corporations, especially large ones. Corporations of all types are subject to the corporate income tax. Instructor Explanation: Chapter 1
Explanation: Ch 1: a is correct, all others are incorrect

a: incorporating provides owners limited liability

b: sole proprietorship has less regulation than corporation

c: In limited partnerships certain partners can be designated general partners and others limited partners with differences in control and liability

d. sole proprietorships and partnerships are taxed just once at owner level (pass-through of income to owners) whereas corporation earnings can be double or triple taxed depending on individual or corporate ownership of stock

e. S-corps can elect to be taxed as proprietorship or partnership

Points Received: 10 of 10 Comments:

2. Question : (TCO G) Aubey Aircraft recently announced that its net income increased sharply from the previous year, yet its net cash flow from operations declined. Which of the following could explain this performance?

Student Answer: The company’s operating income declined. The company’s expenditures on fixed assets declined. The company’s cost of goods sold increased. The company’s depreciation and amortization expenses declined. The company’s interest expense increased. Instructor Explanation: Chapter 2
Ch 2: c is true all others

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