Q19E_5 - Horngren'S Financial And Managerial Accounting

Question

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.

e. Exposure to double taxation is evident.

Step-by-Step Solution

Answer

Double taxation is a disadvantage of a corporation

Step 1: Basic Introduction-

Double taxation alludes to twice payment of income tax on the same source of revenue. Double taxation takes place when income is taxed at both the levels that are corporate level and personal level.

Step 2: Identification of quality-

The owner(s) is obliged to pay tax twice one on the name of corporation and another as an individual on the same revenue such as stock dividend.