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ate three (3) of the main advantage they gain by selecting a corporate form 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 mmon stock for a price above par, what is this amount above par called? Can s amount be treated as a gain, income, or profit for the corporation? Please re the reason for your answer.

ate three (3) of the main advantage they gain by selecting a corporate form 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 mmon stock for a price above par, what is this amount above par called? Can s amount be treated as a gain, income, or profit for the corporation? Please re the reason for your answer.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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: 1. State three (3) of the main advantage they gain by selecting a corporate form of business now. 2. Would you recommend they initially issue preferred or common stock? Why? 3. 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.
Transcribed Image Text: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: 1. State three (3) of the main advantage they gain by selecting a corporate form of business now. 2. Would you recommend they initially issue preferred or common stock? Why? 3. 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.
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