1. River Inc. operates as a partnership. Now the partners have decided to convert the business into a corporation. Which of the following statements is CORRECT?
a. The company will probably be subject to fewer regulations and required disclosures.
b. Assuming the firm is profitable, none of its income will be subject to federal income taxes.
c. The firm's investors will be exposed to less liability, but they will find it more difficult to transfer their ownership.
d. River’s shareholders (the ex-partners) will now be exposed to less liability.
2. Stamps Office Supplies recently reported $15,500 of sales, $8,500 of operating costs other than depreciation, and $1,700 of depreciation. It had $10,000 of bonds outstanding that carry a 6.0% interest rate, and its federal-plus-state income tax rate was 35%. How much was the firm's earnings after taxes?
a. $4,700 b. $4,870 c. $1,645 d. $3,055