Jeremy is thinking of starting up a small business selling NASCAR memorabilia. He asks his friend, Carmen, if she'd like to join him insetting up a partnership to start the business. What is one disadvantage in joining the partnership that Carmen should consider?(A) Carmen should realize that profits in the partnership will be reduced by dividend payments to shareholders.B) Carmen should realize that, as an owner of the business, she will be personally responsible for the debts of the business.Carmen should realize that the profits of the business will also be taxed as dividend income, so she faces the potential fordouble taxation of that business income.D Carmen should realize that the Jeremy will have complete control over the business because it was his idea.C

There are several forms of business that can be used by the organisations. Partnership is one of the…

Answered: Jeremy is thinking of starting up a…

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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Four friends plan to form a corporation for purposes of constructing a shopping center. Charlie will be contributing the land for the project and wants more security than shareholder status provides. He is contemplating two possibilities: receive corporate bonds for his lnd or take out a mortgage on the land before transferring it to the corporation. Comment on the choices Charlie is considering and make an argument for the one you would recommend.
Amy and Jeff Barnes are going to operate their florist shop as a partnership or as an S corporation. After paying salaries of $45,000 to each of the owners, the shop’s earnings are projected to be about $60,000. The earnings are to be invested in the growth of the business. What would you advise them as to which of the two entity forms they should select.
Jessica is a professional consultant. She agrees to consulting services for Joe for $2,000. After she finishes, Joe does not have cash to pay Jessica, but he has an antique, collectible baseball card with a fair market value of $2,000 that he gives her to satisfy the payment. The baseball card cost Joe $500. How much should Jessica include in her gross income?
Jim Bond, a plumber, has been working for Fleming’s Plumbing Supplies for several years. Based on his hard work and the fact that he recently married Ivan Fleming’s daughter, Jim has been invited to enter into a partnership with Fleming. The new partnership will be called Fleming and Bond’s Plumbing Supplies. The terms of the partnership are as follows: (a) Fleming will invest the assets of Fleming’s Plumbing Supplies, and thepartnership will assume all liabilities. The market values of the office and store equipment are estimated to be $18,000 and $8,000, respectively. All other values reported on the balance sheet (shown below) are reasonable approximations of market values. Fleming has no knowledge of any uncollectible accounts receivable.(b) Bond will invest $50,000 cash.(c) Fleming will draw a salary allowance of $50,000 per year, and Bond willreceive $30,000.(d) Each partner will receive 10% interest on the January 1 balance of his capital account.(e) Profits or losses remaining…
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
You are working with a client, Donna, who has come to you letting you know she has no income tax problems for the year, but she wants to run her situations by you, just in case there might be some unexpected tax liability. In the current year, she has the following information to share with you: 1. Donna's share of the SAT partnership income is $150,000, but none of the income can be distributed because the partnership needs the cash for operations. 2. Donna's social security benefits totaled $10,500, but she loaned the cash received to her nephew. 3. Donna assigned to a creditor the right to collect $1,500 of interest on some bonds she owned. 4. Donna and her husband lived together in California until September, when they separated. Donna has heard through the grapevine that her husband has substantial gambling winnings since they separated. 5. Donna found $50,000 in an airport bar, no one came to claim it while she was waiting for her flight, so she kept the envelope. Please draft an…
Nancy Finch has been operating an apartment-locator service as a sole proprietorship. She and Melissa Michaels have decided to form a partnership. Finch's contribution consists of Cash, $3,000; Accounts Receivable $9,000; Fumiture, $13,000; Building (net), $58,000; and Notes Payable, $21,000. To determine Finch's equity in the partnership, she and Michaels hire an independent appraiser. The appraiser values all the assets and liabilities at their book value, except the building, which has a current market value of $96,000. Also, there are additional Accounts Payable of $10,000 that Finch will contribute. Michaels will contribute cash equal to Finch's equity in the partnership. Read the requirements ge Requirement 1. Journalize the entry on the partnership books to record Finch's contribution. (Record debits first, then credits. Select the explanation on the last line of the journal entry table.) ur - X Date Accounts and Explanation Debit Credit Requirements 1. Journalize the entry on…
Emilio Alvarez and Graciela Zavala joined together to form a partnership. Is it possible for them to lose a greater amount than the amount of their investment in the partnership? Explain.
Alex (A), Bebeto (B), and Carol (C) decide to start a lawn mowing business together and form a partnership. A invests $105,000, B invests $175,000, and C invests $280,000. They agree to share the profits in the same ratio as their investments. a. What is the ratio of their investments? Express in lowest terms b. If A's profit was $29.000 in the first vear calculate B's profits and C's profits -> SAVE PROGRESS SUBMIT ASSIGNM 202 acer
Three investors wish to start a manufacturing business. The business is expected to generate a large income which it will reinvest for many years. Investor #1 has substantial assets which he plans to contribute to the business. Investor #1 is also concenred about showing too much business income on his personal return. Which business structure(s) would be most appropriate for the business? 1. A limited partnership with Investor #1 as the limited partner. 2. A business trust with all three as equal partners. 3. An S corporation with all three as equal shareholders. 4. AC corporation with all three as shareholders
Steve Reese is a well-known interior designer in Fort Worth, Texas. He wants to start his own business and convinces Rob O’Donnell, a local merchant, to contribute the capital to form a partnership. On January 1, 2019, O’Donnell invests a building worth $74,000 and equipment valued at $44,000 as well as $32,000 in cash. Although Reese makes no tangible contribution to the partnership, he will operate the business and be an equal partner in the beginning capital balances. To entice O’Donnell to join this partnership, Reese draws up the following profit and loss agreement: O’Donnell will be credited annually with interest equal to 10 percent of the beginning capital balance for the year.O’Donnell will also have added to his capital account 10 percent of partnership income each year (without regard for the preceding interest figure) or $6,000, whichever is larger. All remaining income is credited to Reese.Neither partner is allowed to withdraw funds from the partnership during 2019.…

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