Ben and Eric are opening a comic bookstore to be registered as E&B Comic Bookstore Co. There is no other competingcomic bookstore in the area. Their fundamental decision is how to organize the business and they anticipate a substantialprofit in the first year, with the ability to sell franchises in the future. Although they have enough to start the business nowas a partnership, cash flow will be an issue as they grow. They feel the corporate form of operation will be best for thelong term. They seek your advice.Requirements1. What is the main advantage they gain by selecting a corporate form of business now?2. Distinguish between par value and issue price.3. If they decide to issue $1 par common stock and anticipate an initial market price of $80 per share, how many shareswill they need to issue to raise $4,000,000?4. The owners are desirous of comparing serval financial transactions and possible outcomes to assist in guiding theirdecision-making process. They assume that the company will be formed on January 1, 2020. In addition, E&B ComicBookstore Company's charter will authorize 1,200,000 shares of common stock (to be divided into two classes (700,000shares class A -voting rights and 500,000 shares class B -nonvoting rights) and 400,000, $X par value (see info below),5% cumulative preferred stock. They have asked each student from your accounting course to prepare the company'sjournal entries and statement of owner's equity based on the following information which is grouped according to your firstname initial. (Hint!!!! Example first Manuel will use the initial M and that person should only use the info presentedin line with the heading with their first name initial. You are not allowed to use info associated other initials otherthan that of your own as this will result in the forfeiture of the grade.) A. Issued_shares of class A common stock. Stock has par value of_per share and was issued at $pershare. (Please refer to table below and use only the info in line with your first name initial in the blank/underlinedspace).Issue Price$28.00firstname Initial # of shares issuedA, P, I, E, VC, O, R, Y|К, а, М, FS, W, G, ZD, T, L, UN, B, J, X, HPar value30% of authorised shares $20% of authorised shares $20.0030.00$40.00$62.00$75.0040% of authorised shares$45.0050% of authorised shares $60% of authorised shares80% of authorised shares $45.00$48.00$105.00$125.0060.00B. Issuedfirst name initial in the blank/underlined space).shares of no-par class B stock (Please refer to table below and use only the info in line with yourfirstname Initial # of shares issuedIssue PriceA, P, I, E, VC, O, R, YK, Q, M, FS, W, G, ZD, T, L, UN, B, J, X, H30% of authorised shares25.0038.0060.0070.0098.00118.002$20% of authorised shares$40% of authorised shares$50% of authorised shares$60% of authorised shares$80% of authorised shares$

"As per bartleby guidelines we will solve the first three question for you. If you want any specific…

Answered: Ben and Eric are opening a comic…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Bob, Frank, and Frances are equal partners in a closely held business. Although the partners work well together, their spouses and children do not. No partner is ready to quit the business and/or retire, but they are each worried about how the business would operate if one of the partners left the business due to death or disability. Each partner is financially overextended and thus does not enjoy good cash flow currently. Which one of the following is the most appropriate business transfer technique for the partners to use considering these circumstances? A) A preferred stock recapitalization of the business B) A private annuity agreement among the partners C) A cross-purchase buy-sell agreement among the partners D) An entity buy-sell agreement between the business and each partner
After working for In the Kitchen remodeling business for several years, Terry and Phyllis decided to go into business for themselves and formed the Kitchens Just for You partnership. Three years ago, they admitted Connie as a partner and recognized goodwill at that time because of her good client list for planned kitchen makeovers. However, they were not able to gain a sufficient market for new customers and on September 1, 20X9, they agreed to dissolve and liquidate the business. They decided on an installment liquidation to complete the projects already initiated. The balance sheet, with profit and loss-sharing percentages at the beginning of liquidation, is as follows: KITCHENS JUST FOR YOU Balance Sheet September 1, 20X9 Assets Liabilities and Equities Cash $ 6,000 $ 39,000 Accounts Payable Receivables 68,000 Connie, Loan 14,000 Terry, Loan 8,000 Terry, Capital 11,500 (30%) Inventory 48,000 37,000 Phyllis, Capital (60%) Goodwill 22,000 50,500 Connie, Capital (10%) Total Assets $…
Professional cuddling therapy is a growing industry. You think you might be really good at cuddling so you decide to open a cuddle therapy business. Setting up the business will cost $14,000. Your business will be an all cash business so net income will be equal to your cash flows. You expect to earn $3,000 in net income in your first year of business and $4,000 in net income in the second year. In your third year you will sell the business for $15,000. These are all the cash flows associated with your cuddling business. The cost of capital is 15%. What is the NPV of this project? What is the IRR?
As a recent hire of B-Well, your job is to evaluate whether the company should open a traditional grocery store in Astoria or start online shopping option instead. Before deciding which project to undertake, the Board of Directors has already agreed that they will hire a consultant to verify their decision. The consultant is charging $16, 580 total. They have also agreed that they will hire an NYC marketing agency to promote B-Well's reputation. They are not sure what the charge will be for the marketing services. For now, they just have to decide which project they will undertake. Brick & Mortar Store. B-Well Health Mart has to rent and renovate a space in Astoria. The estimates for the up-front renovation costs range from $2,250,000 to $2,650,000 to be depreciated over the life of the project using straight-line with a zero salvage value. There is a foreclosed warehouse in the area that their lenders are offering at a large discount since the lenders are losing money on it. The…
Christopher Cross graduated from college five years ago with a finance undergraduate degree. Although he is satisfied with his current job, his goal is to become an investment banker. He feels that an MBA degree would allow him to achieve this goal. After examining schools, he narrowed his choice to either Toronto University or Thompson Rivers University. Although internships are encouraged by both schools, to get class credit for internship, no salary can be paid. Other than internships, neither school will allow its students to work while enrolled in its MBA program. Christopher currently works at a fund management firm of Wilcox and Smith. His annual salary at the firm is $60,000 per year, and his salary is expected to increase at 2.5 percent per year until retirement. He is currently 27 years old and expects to work till he is 65 years old. His current job includes a fully paid health insurance plan, and his current average tax rate is 27 percent. Christopher has a savings account…
Swift Delivery is a small company that transports business packages between New York and Chicago. It operates a fleet of small vans that moves packages to and from a central depot within each city and uses a common carrier to deliver the packages between the depots in the two cities. Swift Delivery recently acquired approximately $4 million of cash capital from its owners, and its president, George Hay, is trying to identify the most profitable way to invest these funds. Todd Payne, the company's operations manager, believes that the money should be used to expand the fleet of city vans at a cost of $900,000. He argues that more vans would enable the company to expand its services into new markets, thereby increasing the revenue base. More specifically, he expects cash inflows to increase by $325,000 per year. The additional vans are expected to have an average useful life of four years and a combined salvage value of $100,000. Operating the vans will require additional working capital…
Horace is trying to start a business. He knows several accredited investors who he knows will help him jumpstart his business. What constraints on investments for new businesses apply here? Investors may invest a combined $50 million within a 12-month period. Investors' allowable investment depends on the accredited or non-accredited status. Investors may invest no more than $1 million combined for the first year of the business.
Sarah and Doug want to set up a company to start a business importing children’s toys from Europe into New Zealand. They will both be directors and equal shareholders. They each pay $500,000 for 100 shares each. The company will have assets (personal property) worth $950,000 and $50,000 in cash reserves. The company will borrow $100,000 from Big Bank to make the first purchase of toys from Europe. The company’s assets do not have any securities registered over them. Which of the following statements are INCORRECT? As the directors of the company, Sarah and Doug are personally liable for the $100,000 debt that the company will incur. The company will carry on existing if either Sarah or Doug retires as a director or sells their shares. The company is a separate legal person and its debts are separate from those owed by Sarah and Doug. Sarah and Doug will be able to issue additional shares and sell them if they want to raise additional funds for their company in the future.
Alyssa and Becky are suddenly successful candy makers and have been advised to organize their business to continue their success. They both want to avoid liability and be taxed as little as possible. Alyssa and Becky have heard about the limited liability company and corporations and have sought your advice regarding which form would better achieve their goals and how to organize their business. (a) To create and organize the business.?(b) How can Alyssa and Becky avoid being labeled as another business form? (c) What challenges might exist for creating their desired form?
Harvey Redmond is planning a new business that he expects will grow into a large company within a few years. Harvey’s lawyer has advised him that large companies are usually C-type corporations because of stock market considerations, so he’s considering that form now to avoid reorganizing later on. However, he’s also concerned about the after tax income he’ll be able to take out of the business during the first few years. Harvey thinks his business will have pretax earnings (after paying his salary) of about $150,000 per year for the first three years. Does it make sense for him to operate as a proprietorship for three years and then reorganize into a C-type at an estimated cost of $80,000 or to choose the C-type now at essentially no additional cost? Assume a simplified tax system in which the corporate rate is 34% and Harvey’s personal tax rate is 28% on all income including dividends. Ignore the fact that the cash flows occur at different times and the possibility of using an S-type…
Ten years ago, Valeria and Issac each invested $300,000 to create Xava Corporation. Xava develops and manufactures rock climbing and bungee jumping equipment. The business has become very profitable (it now is valued at $3,000,000), and Issac would like to cash out the profits and sell the business. Valeria, however, wants to reinvest the profits and expand the business into ice diving. Because they have different expectations, Valeria and Issac agree that the best solution is to divide up the company. Issac will receive the bungee division; Valeria, the rock climbing. After the reorganization, Issac sells his stock in the bungee division for $1,500,000 at the beginning of the current year. Valeria retains her ownership of the rock climbing division.. Valeria sells the rock climbing stock for $2,000,000 at the end of six years. Using a 7% discount factor, determine whether Issac or Valeria made a better decision. Assume a 20% tax rate on long-term capital gains. Determine the present…

Recommended textbooks for you

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

FINANCIAL ACCOUNTING

Accounting

ISBN:

9781259964947

Author:

Libby

Publisher:

MCG

Accounting

ISBN:

9781337272094

Author:

WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.

Publisher:

Cengage Learning,

Accounting Information Systems

Accounting

ISBN:

9781337619202

Author:

Hall, James A.

Publisher:

Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…

Accounting

ISBN:

9780134475585

Author:

Srikant M. Datar, Madhav V. Rajan

Publisher:

PEARSON

Intermediate Accounting

Accounting

ISBN:

9781259722660

Author:

J. David Spiceland, Mark W. Nelson, Wayne M Thomas

Publisher:

McGraw-Hill Education

Financial and Managerial Accounting

Accounting

ISBN:

9781259726705

Author:

John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS