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.
Karen and Yanique are opening a jewellery store with no competition in the area from which they intend to operate their business. 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
Requirements:
- 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.
- Assume one year later (2019) the company KY Jeweller’s Ltd has been formed and the owners are desirous of companying several financial transactions and possible outcomes to assist in guiding their decision-making process. 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 fist name initial. (Hint!!!! Example fist name Michael 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.)The company’s charter authorizes 1,000,000 shares of common stock and 100,000 shares of
preferred stock and the following are the transactions for consideration:- KY Jewelers purchased a piece of land from the original owner. In payment for the land, KY Jewelers issues ___ (please refer to table below and use only the info in line with your fist name initial) shares of common stock with $1.00 par value. The land has been appraised at a market value of ____ (Please refer to table below for land value under the category with your first name initial).
First Name Initial
# of shares issued
Value of land
A, P, I, E, V
300,000
$1,200,000
C, O, R, Y
350,000
$1,350,000
K, Q, M, F
380,000
$1,500,000
S, W, G, Z
400,000
$1,480,000
D, T, L, U
410,000
$1,560,000
N, B, J, X, H
390,000
$1,520,000
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