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Scenario.
Two graduate students started an appliance business in an area where there is no competition. Their fundamental decision is how to organize the business. They anticipate super-profits the first year, with the ability to sell franchises in the future. Although they have enough to start the business now as a
- State three (3) of the main advantage they gain by selecting a corporate form of business now.
- Would you recommend they initially issue preferred or common stock? Why?
- If the corporation when formed sets a par value for its shares low and issue common stock for a price above par, what is this amount above par called? Can this amount be treated as a gain, income, or profit for the corporation? Please give the reason for your answer.
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- Steve Osbourne is considering opening a business, but the major decision faced is how to organize the business. Steve anticipates generating a massive profit during the first year and that the following years should be relatively profitable. Although he has enough to start the business now as a partnership, he believes cash flow may be an issue as the company grows. Steve believes that the corporate form of operation will be his best option and have hired you as a consultant and seek your advice. Requirements: Answer the following questions for Steve. Is it true or false that corporations muse issue common stock, but may or may not decide to issue preferred stock? Is it true or false that all forms and classes of stock carry voting rights? Is it true of false that stock sold for amounts in excess of par value results in a gain reported on the income statement?Steve Osbourne is considering opening a business, but the major decision faced is how to organize the business. Steve anticipates generating a massive profit during the first year and that the following years should be relatively profitable. Although he has enough to start the business now as a partnership, he believes cash flow may be an issue as the company grows. Steve believes that the corporate form of operation will be his best option and have hired you as a consultant and seek your advice. Requirements: Answer the following questions for Steve. A) Explain the corporate characteristic termed “no mutual agency” B) Explain the corporate characteristic termed limited liability. C) Explain the term outstanding stock.Steve Osbourne is considering opening a business, but the major decision faced is how to organize the business. Steve anticipates generating a massive profit during the first year and that the following years should be relatively profitable. Although he has enough to start the business now as a partnership, he believes cash flow may be an issue as the company grows. Steve believes that the corporate form of operation will be his best option and have hired you as a consultant and seek your advice. Requirements: Answer the following questions for Steve. D) Is it true or false that corporations muse issue common stock, but may or may not decide to issue preferred stock? E) Is it true or false that all forms and classes of stock carry voting rights? F) Is it true of false that stock sold for amounts in excess of par value results in a gain reported on the income statement?
- Steve Osbourne is considering opening a business, but the major decision faced is how to organize the business. Steve anticipates generating a massive profit during the first year and that the following years should be relatively profitable. Although he has enough to start the business now as a partnership, he believes cash flow may be an issue as the company grows. Steve believes that the corporate form of operation will be his best option and have hired you as a consultant and seek your advice. Answer the following questions for Steve. Is it true or false that corporations muse issue common stock, but may or may not decide to issue preferred stock? Is it true or false that all forms and classes of stock carry voting rights? Is it true of false that stock sold for amounts in excess of par value results in a gain reported on the income statement?Steve Osbourne is considering opening a business, but the major decision faced is how to organize the business. Steve anticipates generating a massive profit during the first year and that the following years should be relatively profitable. Although he has enough to start the business now as a partnership, he believes cash flow may be an issue as the company grows. Steve believes that the corporate form of operation will be his best option and have hired you as a consultant and seek your advice. The company is desirous of comparing serval financial transactions and possible outcomes to assist in guiding its decision-making process. It is assumed that the company will be formed on January 1, 2021 and registered as Osbourne Corporation. The company’s charter will authorize 1,000,000 shares of common stock and 400,000, $100 par value, 5% cumulative preferred stock. Issued 45,500 shares of common stock. Stock has par value of 0.30 per share and was issued at $30.00 per share. Issued…Scenario: Steve Osbourne is considering opening a business, but the major decision faced is how to organize the business. Steve anticipates generating a massive profit during the first year and that the following years should be relatively profitable. Although he has enough to start the business now as a partnership, he believes cash flow may be an issue as the company grows. Steve believes that the corporate form of operation will be his best option and have hired you as a consultant and seek your advice. Requirements: Answer the following questions for Steve. Explain the corporate characteristic termed “no mutual agency” Explain the corporate characteristic termed limited liability. Explain the term outstanding stock.
- Scenario: Steve Osbourne is considering opening a business, but the major decision faced is how to organize the business. Steve anticipates generating a massive profit during the first year and that the following years should be relatively profitable. Although he has enough to start the business now as a partnership, he believes cash flow may be an issue as the company grows. Steve believes that the corporate form of operation will be his best option and have hired you as a consultant and seek your advice. Requirements: Answer the following questions for Steve. Is it true or false that corporations muse issue common stock, but may or may not decide to issue preferred stock? Is it true or false that all forms and classes of stock carry voting rights? Is it true of false that stock sold for amounts in excess of par value results in a gain reported on the income statement?Scenario:Steve Osbourne is considering opening a business, but the major decision faced is how to organize the business. Steveanticipates generating a massive profit during the first year and that the following years should be relatively profitable.Although he has enough to start the business now as a partnership, he believes cash flow may be an issue as thecompany grows. Steve believes that the corporate form of operation will be his best option and have hired you as aconsultant and seek your advice. e) Is it true or false that all forms and classes of stock carry voting rights?f) Is it true of false that stock sold for amounts in excess of par value results in a gain reported on the incomestatement?Steve Osbourne is considering opening a business, but the major decision faced is how to organize the business. Steve anticipates generating a massive profit during the first year and that the following years should be relatively profitable. Although he has enough to start the business now as a partnership, he believes cash flow may be an issue as the company grows. Steve believes that the corporate form of operation will be his best option and have hired you as a consultant and seek your advice. Explain the corporate characteristic termed “no mutual agency” Explain the corporate characteristic termed limited liability. Explain the term outstanding stock.
- Steve Osbourne is considering opening a business, but the major decision faced is how to organize the business. Steve anticipates generating a massive profit during the first year and that the following years should be relatively profitable. Although he has enough to start the business now as a partnership, he believes cash flow may be an issue as the company grows. Steve believes that the corporate form of operation will be his best option and have hired you as a consultant and seek your advice. Is it true or false that corporations muse issue common stock, but may or may not decide to issue preferred stock? Is it true or false that all forms and classes of stock carry voting rights? Is it true of false that stock sold for amounts in excess of par value results in a gain reported on the income statement?Scenario:Steve Osbourne is considering opening a business, but the major decision faced is how to organize the business. Steveanticipates generating a massive profit during the first year and that the following years should be relatively profitable.Although he has enough to start the business now as a partnership, he believes cash flow may be an issue as thecompany grows. Steve believes that the corporate form of operation will be his best option and have hired you as aconsultant and seek your advice. c) Explain the term outstanding stock.d) Is it true or false that corporations muse issue common stock, but may or may not decide to issue preferredstock?Scenario: Jay and Kay are opening a pain store to be registered as J&K Paint Shop Company Ltd. There is no other competing pain shop in the area, but 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 based on answers to the following questions: Questions: Which of the following characteristics is an advantage of the corporate form of business? Higher degree of government regulation The potential to raise large amounts of capital Separation of ownership and management Double taxation Which of the following statements describes the corporate characteristic termed limited liability? The liabilities of the corporation cannot be extended to the personal assets…