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 8,000 shares of preferred stock at par value as payment in exchange for legal services. Exchanged 160,000 shares of common stock for land with an appraised value of $400,000.00 and a building with an appraised value of $650,000.00 . Earned Net income $650,000.00. Paid dividends to preferred shareholders as well as $2 per share to common stockholders. Using the info above and as a guide: A) 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. B) Prepare Osbourne Corporation Stockholders equity section of the balance sheet at December 31, 2021. (Hint!!!!!!!) 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.

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 8,000 shares of preferred stock at par value as payment in exchange for legal services. Exchanged 160,000 shares of common stock for land with an appraised value of $400,000.00 and a building with an appraised value of $650,000.00 . Earned Net income $650,000.00. Paid dividends to preferred shareholders as well as $2 per share to common stockholders. Using the info above and as a guide: A) 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. B) Prepare Osbourne Corporation Stockholders equity section of the balance sheet at December 31, 2021. (Hint!!!!!!!) 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.

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 57P

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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 8,000 shares of preferred stock at par value as payment in exchange for legal services.

Exchanged 160,000 shares of common stock for land with an appraised value of $400,000.00 and a building with an appraised value of $650,000.00 .

Earned Net income $650,000.00.

Paid dividends to preferred shareholders as well as $2 per share to common stockholders.

Using the info above and as a guide:

A) 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.

B) Prepare Osbourne Corporation Stockholders equity section of the balance sheet at December 31, 2021. (Hint!!!!!!!) 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.

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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