会计专业英语章节练习题及答案（共17章）chapter 5.docx

Chapter 5 Discussion questions Why are large corporation often said to be publicly owned? Ownership of a corporation is evidenced by transferable shares of stock. The sale of corporate ownership in units of one or more shares permits both large and small investors to participate in ownership of the business for this reason. Large corporations are often said to be publicly owned. 2. Explain the meaning of the term double taxation as it applies to corporate profits. The income of a corporation is subject to income taxes which must be paid by the corporation. If a corporation distributes its earnings to stockholders, the stockholders must pay personal income taxes on the amounts they receive. This practice of first taxing corporate income to the corporation and then taxing distributions of the income to the stockholders is sometimes called double taxation. 3. Distinguish between paid-in capital and retained earnings of corporation. Paid-in capital is an equity account representing the amount of assets invested in the company by its shareholders. Retained earnings is a special type of reserve account which reflects the amount of profits (after tax) earned by the company and retained in the business. And retained earnings represents a companys accumulated net income that has not been distributed to stockholders as dividends. 4. What is the purpose of a stock split? A corporation may split its stock by increasing the number of outstanding shares of common stock and reducing the par or stated value per share in proportion. As with a large stock dividend, the purpose of a stock split is to reduce substantially the market price of the common stock, with the intent of making the stock more affordable to investors. 5. What does book value per share of common stock represent? Does it represent the amount common stockholders would receive in the event of liquidation of the corporation? Book value per share is equal to the net assets represented by one share of stock. T