a
Concept Introduction: Various organizations have some of the characteristics of a
The situation under which amount of money creditors can take from C’s personal assets to pay unpaid business debts when the business is set up as an LLC.
b
Concept Introduction: Various organizations have some of the characteristics of a partnership, some of them are S corporations and Limited liability Companies. An S corporation maximum of 100 owners may choose to be treated as a partnership for income tax purposes and LLC has some of the corporation and Limited Liability Company features.
The situation under which amount of money creditors can take from C’s personal assets to pay unpaid business debts when the business is set up as S corporation.
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FUNDAMENTAL ACCOUNTING PRINCIPLES
- Description Business Organization a. Riley and Kay own Speedy Packages, a courier service. Both are personally liable for the debts of the business. Partnership b. Lannister owns Wealth Management. The business is a separate legal entity and pays an additional business income tax. c. Raymond and Amy own Security Services. The business is not a separate legal entity. d. Ownership of Zander Company is divided into 1,000 shares of stock. The company pays a business income tax. Corporation e. Russell is the sole owner of Wilson Sports. The business is not a separate legal entity from Russell and the business ends with his death. f. Trent Company is owned by Trent Malone, who is personally liable for the company's debts. Sole proprietorship g. Micah and Nancy own Financial Services, which pays a business income tax. Micah and Nancy do not have personal responsibility for the debts of Financial Services. Corporation h. Vera is the sole owner of Tech…arrow_forwardLiability comparisons Nerissa Smith has invested $25,000 in Northeast Productions Company. The firm has recently declared bankruptcy and has $60,000 in unpaid debts. Explain the nature of Nerissa's personal liabilit , if any, in each of the following situations. a. Northeast Productions Company is a sole proprietorship owned by Ms. Smith. b. Northeast Productions Company is a 50-50 general partnership of Nerissa Smith and Roger Brown. c. Northeast Productions Company is a limited partnership where Nerissa Smith is a limited partner. d. Northeast Productions Company is a corporation. 1) If Northeast Productions Company is a 50-50 partnership of Nerissa Smith and Roger Brown,: (Select the best answer below.) A.Ms. Smith has unlimited liability, which means creditors can only claim against the $25,000 she invested. B.Ms. Smith has limited liability, which is $30,000, or half of the $60,000 in unpaid debts. C.Ms. Smith has unlimited liability, which means creditors…arrow_forwardNOTE: These are MCQS MCQS 11In which type of a business, the owner and his business are not considered same in the eyes of law?(a) Sole proprietorship(b) Limited companies(c) Partnership(d) a and c MCQS 12Which of the following liabilities would most likely be listed last on a statement of financial position?A)Bonds payable, due in 20 years.B)Accounts payable.C)Note payable, due in 3 years.D)Income taxes payable. MCQS 13Sales Gross Profit = __A)Cost of Goods SoldB)Net SalesC)Cost of Goods Available for SaleD)Gross Sales MCQS 14Land is purchased for $456,000. Additional costs include a $30,300 fee to a broker, a survey fee of $3,400, $2,750 to construct a fence, and a legal fee of $12,500. What is the cost of the land?A. $456,000.B. $486,300.C. $502,200.D. $504,950. MCQS 15Which of the following transactions occurs on daily basis in a large business organization?(a) Purchaser of equipment(b) Payroll(c) Credit sales(d) Payment of suppliers MCQS 16Prepaid expenses are assets that…arrow_forward
- On January 1st, 20X1, TK transfers the business liability insurance for the year 20X1 in the amount of EUR 240 from his private bank account. Which of the following statements regarding business transactions in 20X1 is/are correct? O No booking is required. O Profit decreases by 240 EUR. O Equity remains unchanged. O There is a private withdrawal.arrow_forward1 of 1 Class Activity Kand A are partners in a firm. They share profits and the losses in the ratio of 4:1. They decide to dissolve thefirm on March 31,2021, their balance sheet is as follows: Liabilities RO Assets RO Bank loan 8250 Trade mark 6600 Creditors for goods 44000 Machine 66000 Bills payable 2750 Furniture 2200 K's Capital Ac 88000 Stock 33000 A's Capital Ac 33000 Debtors Less: Provision for bad debt 49500-2200 47300 O Cash in hand O Profit & loss Ac 15400 5500 Total 176000 Total 176000 The realization shows the following results: Debtors were realized at book value less 10% Goodwill was sold for 5500 Trade mark was realized for 4400 Machinery and stock were taken over by K for 99000 An unrecorded asset was sold for 1100 A creditor for goods was settled at discount of The expenses on realization were Pass Journal Entries and Prepare Realization A/c, Capital A/cs and Cash/Bank A/c. 440 2200arrow_forwardCurrent Attempt in Progress Suzy Vopat has owned and operated a proprietorship for several years. On January 1, she decides to terminate this business and become a partner in the firm of Vopat and Sigma. Vopat's investment in the partnership consists of $12,000 in cash, and the following assets of the proprietorship: accounts receivable $14,700 less allowance for doubtful accounts of $2,300, and equipment $19,600 les accumulated depreciation of $3,700. It is agreed that the allowance for doubtful accounts should be $3,450 for the partnership. The fair value of the equipment is $13,500. Journalize Vopat's admission to the firm of Vopat and Sigma. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Jan. 1 Debit Credit 100arrow_forward
- Ron Marden and Tip Baker operate separate auto repair shops. On January 1, 2020, they decide to combine their separate businesses which were operated as proprietorships to form M & B Auto Repair, a partnership. Information from their separate balance sheets is presented below: Cash Accounts receivable Allowance for doubtful accounts Accounts payable Notes payable Salaries and wages payable Equipment Accumulated depreciation-equipment Marden Auto Repair $10,000 12,000 1,000 5,000 equity of 1,000 12,000 2,000 It is agreed that the expected realizable value of Marden's accounts receivable is $11,000 and Baker's receivables is $7,000. The fair value of Marden's equipment is $13,000 and the value of Baker's equipment is $20,000. It is further agreed that the new partnership will assume all liabilities of the proprietorships with the exception of the notes payable on Baker's balance sheet which he will pay himself. ; accounts payable ; total liabilities Baker Auto Repair $14,000 10,000 500…arrow_forwardProblem 7-38 (LO. 6) Timothy Gates and Prada Singh decide to form a new company, TGPS LLC (a multimember LLC that will report its operations as a partnership). Timothy is married, and Prada is single. Each contributes $400,000 of capital to begin the business, and both materially participate in the business. In 2018, TGPS reports a net loss of $580,000. What are the implications of this loss for Timothy and Prada? If an amount is zero, enter "0". Timothy has an excess business loss of loss to offset nonbusiness income ✓ 0. He may use 290,000✔ of his share of the $580,000 LLC business 0 X. She may use $ 290,000 X of her share of the $580,000 LLC business Prada has an excess business loss of $ loss to offset nonbusiness income ✔ Any excess business loss is treated as part of the taxpayer's NOL carryforward ✓arrow_forwardLlabillty comparlsons Merideth Harper has invested $25,000 in Southwest Development Company. The firm has recently declared bankruptcy and has $60,000 in unpaid debts. Explain the nature of payments, if any, by Merideth in each of the follawing situations. a. Sauthwest Develapment Company is a sole proprietorship owned by Ms. Harper. b. Southwest Development Campany is a 50-50 partnership of Merideth Harper and Christapher Black a. If Southwest Develapment Company is a sole praprietarship owned by Ms. Harper: (Select the best answer below.) O A. Ms. Harper has limited iability, which is the amount of $80,000 in unpaid debts. O B. Ms. Harper has unlimited liability, which means creditors can claim against her personal assets. C. O D. Ms. Harper has limited liability, which guarantees that she cannot lose more than the $25,000 she invested. Ms. Harper has unlimited liability, which means creditors can only claim against the S25 000 she investedarrow_forward
- CJ and Danny have incorporated and obtained a $100,000 loan in their corporate name. The loan is payable with interest over five years. After paying on the loan regularly for two years, the business falters due to the economy, and CJ and Danny default on the loan. Their business has no assets. Which of the following statements best describes CJ and Danny's liability in this case? Group of answer choices CJ and Danny are each individually liable for one-third of the debt, with the corporation liable for the remaining third. CJ and Danny are each individually liable for one quarter of the debt, with the corporation liable for the remaining half. CJ and Danny are jointly and severally liable for the entire balance. CJ and Danny have no personal liability for the debt unless they pledged personal assets as collateral or signed a personal guarantee.arrow_forwardMoustapha and Ava want to form a business to buy and sell small appliances. They will both actively work in the business. They are concerned about personal liability. They estimate the company will not be profitable for five years and they want to be able to deduct any losses. Which form of entity should they use to accomplish their objectives? O limited partnership O any of the listed entities would accomplish their objectives O limited liability company O general partnershiparrow_forwardF. The partnership of Anthony and Davis had an unprofitable year and agreed to liquidate their business on December 31, 2019. The Statement of Financial Position as of December 31, 2019 is presented below: A S S E T S Cash P 1,000 Accounts Receivable P 80,000 Less Allowance for Bad Debts 20,000 60,000 Merchandise Inventory 50,000 Prepaid Advertising 2,000 Office Equipment P 100,000 Less Accumulated Depreciation 60,000 40.000 TOTAL ASSETS P 153,000 LIABILITIES AND EQUITY Accounts Payable P 20,000 Notes Payable (due October 31, 2020) 86,000 Anthony, Capital 30,000 Davis, Capital 17,000 TOTAL…arrow_forward
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENTFinancial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning