Financial statements are periodic reports published by the company for the purpose of providing information to managers.

121. One advantage of the corporate form of business is double taxation. 

FALSE

Double taxation is a disadvantage of the corporate form of business. 

122. Double taxation refers to a corporation's income being taxed twice—first when the company earns it and pays corporate income taxes on it, and then again when stockholders pay personal income taxes on any amounts the firm distributes to them as dividends. 

TRUE

123. Financial statements are periodic reports published by the company for the purpose of providing information to managers. 

FALSE

Financial statements are designed to provide information to external users.

124. The balance sheet is a financial statement that reports the company's revenues and expenses over an interval of time. 

FALSE

The income statement reports revenues and expenses.

125. The statement of stockholders' equity is a financial statement that summarizes the changes in stockholders' equity over an interval of time. 

TRUE

126. The two primary components of stockholders' equity include common stock and revenue. 

FALSE

The two components of stockholders' equity include common stock and retained earnings.

127. Common stock represents an external source of stockholders' equity, whereas retained earnings represents an internal source. 

TRUE

128. Retained earnings represents the cumulative amount of net income earned over the life of the company that has not been distributed to stockholders as dividends. 

TRUE

129. Dividends are considered an expense in running the business and reported in the income statement. 

FALSE

Dividends are a distribution of resources to owners and not considered a cost in running the business to produce revenues. Dividends are reported in the statement of stockholders' equity.

130. All cash transactions reported in the statement of cash flows are classified as either (1) operating activities, (2) investing activities, or (3) financing activities. 

TRUE