Scenario: 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 partnership, cash flow will be an issue as they grow and as such, they feel the corporate form of operation will be best for the long term. They seek your advice.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. 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 ___ () shares of common stock with $1.00 par value. The land has been appraised at a market value of ____ (refer to the table below380,000$1,500,000The company sold ___refer to the table below) shares of common stock with $1 par value. 150,000 Issued ___ (please refer to table below) shares of $___ (please refer to table below) par value preferred stock. Shares were issued at par.23,000$16Earned net income of $___ (please refer to table below and $940,000Dividend declared and paid - $0.15 per share on common stock Dividend declared and paid - $5 per share on preferred stock Using the information above and as guided:Prepare the Journal entries and closing entries for the above transaction Prepare the owner’s equity section of the balance sheet based on the info above.

Hi student Since there are multiple questions, we will answer only first question.

Answered: State three (3) of the main advantage…

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter13: Choice Of Business Entity—general Tax And Nontax Factors/formation

Section: Chapter Questions

Problem 34P

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Scenario:

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 partnership, cash flow will be an issue as they grow and as such, they feel the corporate form of operation will be best for the long term. They seek your advice.

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. 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 ___ () shares of common stock with $1.00 par value.
The land has been appraised at a market value of ____ (refer to the table below

380,000

$1,500,000

The company sold ___refer to the table below) shares of common stock with $1 par value.

	150,000

Issued ___ (please refer to table below) shares of $___ (please refer to table below) par value preferred stock. Shares were issued at par.

23,000

$16

Earned net income of $___ (please refer to table below and

$940,000

Dividend declared and paid - $0.15 per share on common stock

Dividend declared and paid - $5 per share on preferred stock

Using the information above and as guided:

Prepare the Journal entries and closing entries for the above transaction

Prepare the owner’s equity section of the balance sheet based on the info above.

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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