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In an executive bonus plan, who is typically the owner of the life insurance policy and who is responsible for paying the premium?
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1. Introduction to Accounting
Types of Accounting
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Which of the following statements about corporations is correct?
A
A corporation can both incur liabilities and own property.
B
A corporation can incur liabilities but cannot own property.
C
A corporation can neither incur liabilities nor own property.
D
A corporation cannot incur liabilities but can own property.
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Understand the concept of a corporation: A corporation is a legal entity that is separate from its owners (shareholders). It has rights and responsibilities similar to those of an individual.
Review the characteristics of a corporation: Corporations can enter into contracts, sue and be sued, own property, and incur liabilities. These abilities are granted by law to ensure the corporation can operate independently.
Analyze the options provided in the question: Evaluate each statement based on the legal characteristics of a corporation.
Option 1: 'A corporation can both incur liabilities and own property.' This aligns with the legal definition of a corporation, as it can perform both actions.
Option 2, 3, and 4: These statements contradict the legal characteristics of a corporation. A corporation can own property and incur liabilities, so these options are incorrect.
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