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. a) Explain the corporate characteristic termed “no mutual agency” b) Explain the corporate characteristic termed limited liability. 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 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? 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. 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. Issued 80,000 shares of common stock. Stock has par value of $0.50 per share and was issued at $30.00 per share.Issued 12,000 shares of preferred stock at par value as payment in exchange for legal services.Exchanged 220,000 shares of common stock for land with an appraised value of $600,000.00 and a building with an appraised value of $350,000.00.Earned Net income $820,000.00.Paid dividends to preferred shareholders as well as $2 per share to common stockholders.Using the info above and as a guide: Prepare the journal entries with narrations to record the following:The issuances of stock.Close out net income to retained earnings.Dividend paid.Close out dividend to retained earnings. Prepare Osbourne Corporation Stockholders equity section of the balance sheet at December 31, 2021. The following information must be clearly stated/shown:information on par values,the number of shares authorized and issued where necessary.the sub total for the total paid in capital.Retained earnings.total stockholders’ equity.

Comment- Since we only answer up to 3 sub-parts of the First question, we’ll answer the first 3.…

Answered: Steve Osbourne is considering opening a…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 7TP: You begin a new job at Cabrera Medical Supplies. The company is considering a new accounting system,...

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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.

a) Explain the corporate characteristic termed “no mutual agency”

b) Explain the corporate characteristic termed limited liability.

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 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?

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. 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.

Issued 80,000 shares of common stock. Stock has par value of $0.50 per share and was issued at $30.00 per share.
Issued 12,000 shares of preferred stock at par value as payment in exchange for legal services.
Exchanged 220,000 shares of common stock for land with an appraised value of $600,000.00 and a building with an appraised value of $350,000.00.
Earned Net income $820,000.00.
Paid dividends to preferred shareholders as well as $2 per share to common stockholders.

Using the info above and as a guide:

Prepare the journal entries with narrations to record the following:

The issuances of stock.
Close out net income to retained earnings.
Dividend paid.
Close out dividend to retained earnings.

Prepare Osbourne Corporation Stockholders equity section of the balance sheet at December 31, 2021. The following information must be clearly stated/shown:

information on par values,
the number of shares authorized and issued where necessary.
the sub total for the total paid in capital.
Retained earnings.
total stockholders’ equity.

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