Cross 9e TBB Ch17 Essay

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Chapter 17

Small Business Organizations

N.B.: TYPE indicates that a question is new, modified, or unchanged, as follows.

N A question new to this edition of the Test Bank.
+ A question modified from the previous edition of the Test Bank.
= A question included in the previous edition of the Test Bank.

TRUE/FALSE QUESTIONS

1. A sole proprietor does not own the entire business.

ANSWER: F PAGES: Section 1 TYPE: N BUSPROG: Analytic AICPA: BB-Legal

2. In choosing a form of business organization for a new enterprise, impor­tant factors include the ability to raise capital.

ANSWER: T PAGES: Section 1 TYPE: N BUSPROG: Reflective AICPA: BB-Critical Thinking

3. A sole proprietor is free to make any decision he or she wishes
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In terms of liability to Delivery Transport, a court is most likely to treat Bayside Marina and Canoes & Kayaks as

a. a pass-through entity.
b. a natural person.
c. a tax-paying entity.
d. a partnership by estoppel.

answer: D PAGES: Section 2 TYPE: N BUSPROG: Reflective AICPA: BB-Legal

6. Sable and Rex agree while talking on the phone to form a partner­ship—The Home Source—to deal in transfers of real property. To be enforceable, their agreement must

a. be filed in the appropriate state office. b. be in writing. c. involve the exchange of valid consideration. d. not involve a third party.

answer: B PAGES: Section 2 TYPE: N BUSPROG: Reflective AICPA: BB-Legal

7. Pualani and Quentin do business as partners in Rio Vista Builders, a residential construction firm. For federal income tax purposes, Rio Vista would be treated as

a. a pass-through entity.
b. a natural person.
c. a tax-paying entity.
d. a partnership by estoppel.

ANSWER: A PAGES: Section 2 TYPE: = BUSPROG: Reflective AICPA: BB-Legal

8. Sweet Selections is a general partnership that sells candy, cards and flowers. Sweet Selections has ten partners. Jill and Amy each have a 25 percent interest in the partnership. All the other members have a 10 percent interest. To pass a management decision

a. a majority of the partners must agree to the decision. b. both Jill and Amy must agree to the decision. c. Jill or Amy must agree to the decision. d. 30 percent of

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