Chapter 13, Problem 13SP

To determine

Concept introduction:

Sources of funds:

A business can raise find through several sources like own capital investment, issuing shares (Common or preferred), issuing debt instruments or taking loans from lenders. Some sources of finance are discussed as follows:

Common Stock and Preferred Stock:

These are two types of the share capital of a company. Common Stock represents the Common shares issued to the shareholders and preferred stock represents the preference shares issued. Preference shares are given preference in payment of dividends and repayment of capital. Common shareholders get the inbuilt right to vote in decisions of the company and preference shareholders generally do not get this right but they may get voting rights with special provisions.

Loan from lenders:

The business may take a loan from banks for a certain period and it has to repay the loan with interest as per the terms of the loan.

Requirement-a:

To prepare: The Journal entries for initial investment in business under each of the given options

To determine

Requirement-b:

To discuss: Three proposals of expansion

To determine

Requirement-c:

To recommend: The best option of finance