Mr. Chua in his plan for expansion by putting up a branch of his grocery near Cubao, has decided to take third option: incorporating under the business name, “Chua Groceries, Inc.” He figures that he needs a subscribed and paid up capital of P100 million to be submitted to the Securities and Exchange Commission (SEC). He has only P50 million cash in the bank. He invited two close friends to chip in the balance. Mr. Chua wants to be elected as president and his wife as treasurer of the company. His two friend would be elected vice-president and corporate secretary, respectively. While Mr. Chua, his wife and son, the manager of the planned branch of the grocery store, would control the day-to-day operations of the company, he does not feel comfortable with the 50-50 sharing of the capital. What it relations with his two friends turn sour in the future? Aggressive and ambitious that Mr. Chua is, what worries him is if he further expands the grocery business in the future and the two friends do not agree, there would be a deadlock in the voting. His two friends could be a bar to his future expansion plans. Mr. Chua decided to go on a 51-49 percent sharing in the stockholdings of the planned company. 51% is to be owned and controlled by him. He needs therefore P2 million more for his paid up capital to assure control of the company. His problem is, where he would get that much money fast? Which sources of funds could Mr. Chua avail of on credit?

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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Mr. Chua in his plan for expansion by putting up a branch of his grocery near Cubao, has decided to take third option: incorporating under the business name, “Chua Groceries, Inc.” He figures that he needs a subscribed and paid up capital of P100 million to be submitted to the Securities and Exchange Commission (SEC). He has only P50 million cash in the bank. He invited two close friends to chip in the balance. Mr. Chua wants to be elected as president and his wife as treasurer of the company. His two friend would be elected vice-president and corporate secretary, respectively. While Mr. Chua, his wife and son, the manager of the planned branch of the grocery store, would control the day-to-day operations of the company, he does not feel comfortable with the 50-50 sharing of the capital. What it relations with his two friends turn sour in the future? Aggressive and ambitious that Mr. Chua is, what worries him is if he further expands the grocery business in the future and the two friends do not agree, there would be a deadlock in the voting. His two friends could be a bar to his future expansion plans. Mr. Chua decided to go on a 51-49 percent sharing in the stockholdings of the planned company. 51% is to be owned and controlled by him. He needs therefore P2 million more for his paid up capital to assure control of the company. His problem is, where he would get that much money fast? Which sources of funds could Mr. Chua avail of on credit?

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