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Ben and Eric are opening a comic bookstore to be registered as E&B Comic Bookstore Co. There is no other competing comic bookstore in the area. Their fundamental decision is how to organize the business and they anticipate a substantial profit in the first year, with the ability to sell franchises in the future. Although they have enough to start the business now as a partnership, cash flow will be an issue as they grow. They feel the corporate form of operation will be best for the long term. They seek your advice. Requirements 1. What is the main advantage they gain by selecting a corporate form of business now? 2. Distinguish between par value and issue price. 3. If they decide to issue $1 par common stock and anticipate an initial market price of $80 per share, how many shares will they need to issue to raise $4,000,000?

Ben and Eric are opening a comic bookstore to be registered as E&B Comic Bookstore Co. There is no other competing comic bookstore in the area. Their fundamental decision is how to organize the business and they anticipate a substantial profit in the first year, with the ability to sell franchises in the future. Although they have enough to start the business now as a partnership, cash flow will be an issue as they grow. They feel the corporate form of operation will be best for the long term. They seek your advice. Requirements 1. What is the main advantage they gain by selecting a corporate form of business now? 2. Distinguish between par value and issue price. 3. If they decide to issue $1 par common stock and anticipate an initial market price of $80 per share, how many shares will they need to issue to raise $4,000,000?

Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 10MCQ
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Ben and Eric are opening a comic bookstore to be registered as E&B Comic Bookstore Co. There is no other competing comic bookstore in the area. Their fundamental decision is how to organize the business and they anticipate a substantial profit in the first year, with the ability to sell franchises in the future. Although they have enough to start the business now as a partnership, cash flow will be an issue as they grow. They feel the corporate form of operation will be best for the long term. They seek your advice.
Requirements
1. What is the main advantage they gain by selecting a corporate form of business now?
2. Distinguish between par value and issue price.
3. If they decide to issue $1 par common stock and anticipate an initial market price of $80 per share, how many shares will they need to issue to raise $4,000,000?
4. The owners are desirous of comparing serval financial transactions and possible outcomes to assist in guiding their decision-making process. They assume that the company will be formed on January 1, 2020. In addition, E&B Comic Bookstore Company’s charter will authorize 1,200,000 shares of common stock (to be divided into two classes (700,000 shares class A -voting rights and 500,000 shares class B -nonvoting rights) and 400,000, $X par value (see info below), 5% cumulative preferred stock. They have asked each student from your accounting course to prepare the company’s journal entries and statement of owner’s equity based on the following information which is grouped according to your first name initial. (Hint!!!! Example first Manuel will use the initial M and that person should only use the info presented in line with the heading with their first name initial. You are not allowed to use info associated other initials other than that of your own as this will result in the forfeiture of the grade.)

ACCT1002 Introduction to Financial Accounting A. Issued _shares of class A common stock. Stock has par value of per share and was issued at $ per share. (Please refer to table below and use only the info in line with your first name initial in the blank/underlined space). firstname Initial # of shares issued |Par value Issue Price A, P, I, E, V C, 0, R, Y |к, о, М, F S, W, G, Z D, T, L,U N, B, J, X, H 30% of authorised shares $ 20.00 20% of authorised shares |40% of authorised shares |50% of authorised shares $28.00 $40.00 $62.00 30.00 45.00 45.00 $75.00 60% of authorised shares 48.00 $105.00 $125.00 $ 80% of authorised shares 60.00 B. Issued shares of no-par class B stock (Please refer to table below and use only the info in line with your first name initial in the blank/underlined space). firstname Initial # of shares issued A, P, I, E, V C, O, R, Y K, Q, M, F S, W, G, Z D, T, L, U N, B, J, X, H Issue Price 25.00 30% of authorised shares 2$ 20% of authorised shares 38.00 40% of authorised shares $ 60.00 70.00 98.00 50% of authorised shares $ 60% of authorised shares 80% of authorised shares 118.00
Transcribed Image Text:ACCT1002 Introduction to Financial Accounting A. Issued _shares of class A common stock. Stock has par value of per share and was issued at $ per share. (Please refer to table below and use only the info in line with your first name initial in the blank/underlined space). firstname Initial # of shares issued |Par value Issue Price A, P, I, E, V C, 0, R, Y |к, о, М, F S, W, G, Z D, T, L,U N, B, J, X, H 30% of authorised shares $ 20.00 20% of authorised shares |40% of authorised shares |50% of authorised shares $28.00 $40.00 $62.00 30.00 45.00 45.00 $75.00 60% of authorised shares 48.00 $105.00 $125.00 $ 80% of authorised shares 60.00 B. Issued shares of no-par class B stock (Please refer to table below and use only the info in line with your first name initial in the blank/underlined space). firstname Initial # of shares issued A, P, I, E, V C, O, R, Y K, Q, M, F S, W, G, Z D, T, L, U N, B, J, X, H Issue Price 25.00 30% of authorised shares 2$ 20% of authorised shares 38.00 40% of authorised shares $ 60.00 70.00 98.00 50% of authorised shares $ 60% of authorised shares 80% of authorised shares 118.00
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