Question

A privately held corporation has a limited life because it is tied to the physical lives of its owners. * True False The shareholders can vote to pay themselves a dividend. * True False Cumulative preferred shares carry the right to be paid both current and all prior periods' unpaid dividends before any dividends are paid to common shareholders. * O True False

Answer 1

1. False.

A corporation would have a continuous life regardless of it being a public or a private corporation.The corporation's life   would not be effected by the changes in ownership of stock.The life of a private corporation is not limited by the physical life of its owners.

2.False

Shareholders cannot vote to pay themselves a dividend, it is the decision of the company's board of directors.The BOD decide whether they want to give a dividend or not.

3.True

Cumulative preferred stock have a right to be given or paid all the previous as well as current year unpaid dividends, prior to any of these dividends are paid to the common shareholders.Previous dividends which are unpaid are accumulated until these are paid to the preferred stock.

4.Audits should always be conducted by employees internal to the organization is the correct option.

The principle of internal control includes, establishing clear responsibilities, insure the assets and bond the key employees, maintaining adequate records,dividing responsibility for the related transactions, performing regular and independent audits.The audits conducted are preferably carried out by internal auditors who are not directly associated with the activities being audited but many companies hire independent, external auditors.

5.Deducted from the bank balance of cash is the correct option.

An outstanding cheque on the last month's bank reconciliation which was not among the cheques returned by the bank this month,would under the current month still stand in the outstanding cheques list and thus under the current month's reconciliation , the amount of such an outstanding cheque would be deducted from the bank balance of cash.