Identifying advantages and disadvantages of a corporation
Following is a list of advantages and disadvantages of the corporate form of business. Identify each quality as either an advantage or a disadvantage.
a. Ownership and management are separated.
Ownership and management are separate is a disadvantage for a corporation.
Corporation is a legal structure incorporated with the purpose to carry out business or operational activities and is considered distinct from its owners.
Separation of ownership and management in corporate includes putting the management of the firm under the responsibility of experts or professionals who are not the owners of the corporation.
Owners of a company may involve shareholders, government entities, directors, other corporations and the primary founders of the corporation.
Question: Accounting for the purchase and sale of treasury stock
Discount Furniture, Inc. completed the following treasury stock transactions in 2018:
Dec. 1 Purchased 1,900 shares of the company’s $1 par value common stock as treasury stock, paying cash of $5 per share.
15 Sold 200 shares of the treasury stock for cash of $8 per share.
20 Sold 1,000 shares of the treasury stock for cash of $1 per share. (Assume the balance in Paid-In Capital from Treasury Stock Transactions on December 20 is $2,400.)
2. How will Discount Furniture, Inc. report treasury stock on its balance sheet as of December 31, 2018?
Match the accounting terminology to the definitions.
1. Factoring receivables a. A monetary claim against a business or an individual.
2. Debtor b. The party to a transaction who takes on an obligation/payable.
3. Accounts receivable c. Using receivables as security (collateral) for a loan.
4. Maturity date d. The right to receive cash in the future from customers for goods sold or for services provided.
5. Receivable e. The date when a note is due.
6. Pledging receivables f. Selling receivables to a finance company or bank.
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