Ben and Eric are opening a comic bookstore to be registered as E&B Comic Bookstore Co. There is no other competing comic bookstore in the area. Their fundamental decision is how to organize the business and they anticipate a substantial profit in 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. They feel the corporate form of operation will be best for the long term. They seek your advice. Requirements 1. 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 shares will they need to issue to raise $4,000,000?
Ben and Eric are opening a comic bookstore to be registered as E&B Comic Bookstore Co. There is no other competing
comic bookstore in the area. Their fundamental decision is how to organize the business and they anticipate a substantial
profit in the first year, with the ability to sell franchises in the future. Although they have enough to start the business now
as a
long term. They seek your advice.
Requirements
1. 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 shares
will 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 their
decision-making process. They assume that the company will be formed on January 1, 2020. In addition, E&B Comic
Bookstore Company’s charter will authorize 1,200,000 shares of common stock (to be divided into two classes (700,000
shares class A -voting rights and 500,000 shares class B -nonvoting rights) and 400,000, $X par value (see info below),
5% cumulative
name initial. (Hint!!!! Example first Manuel will use the initial M and that person should only use the info presented
in line with the heading with their first name initial. You are not allowed to use info associated other initials other
than that of your own as this will result in the forfeiture of the grade.)
ACCT1002 Introduction to Financial Accounting
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A. Issued ____shares of class A common stock. Stock has par value of ___ per share and was issued at $____ per
share. (Please refer to table below and use only the info in line with your first name initial in the blank/underlined
space).
firstname Initial # of shares issued Par value Issue Price
A, P, I, E, V 30% of authorised shares $ 20.00 $28.00
C, O, R, Y 20% of authorised shares $ 30.00 $40.00
K, Q, M, F 40% of authorised shares $ 45.00 $62.00
S, W, G, Z 50% of authorised shares $ 45.00 $75.00
D, T, L, U 60% of authorised shares $ 48.00 $105.00
N, B, J, X, H 80% of authorised shares $ 60.00 $125.00
B. Issued _____ shares of no-par class B stock (Please refer to table below and use only the info in line with your
first name initial in the blank/underlined space).
firstname Initial # of shares issued Issue Price
A, P, I, E, V 30% of authorised shares $ 25.00
C, O, R, Y 20% of authorised shares $ 38.00
K, Q, M, F 40% of authorised shares $ 60.00
S, W, G, Z 50% of authorised shares $ 70.00
D, T, L, U 60% of authorised shares $ 98.00
N, B, J, X, H 80% of authorised shares $ 118.00
ACCT1002 Introduction to Financial Accounting
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C. Issued _______ shares of preferred stock at par value. (Please refer to table below and use only the info in line
with your first name initial in the blank/underlined space).
firstname Initial # of shares issued Par Value
A, P, I, E, V 50% of authorised shares $ 100.00
C, O, R, Y 40% of authorised shares $ 110.00
K, Q, M, F 30% of authorised shares $ 125.00
S, W, G, Z 25% of authorised shares $ 145.00
D, T, L, U 20% of authorised shares $ 168.00
N, B, J, X, H 10% of authorised shares $ 192.00
D. Exchanged ______ shares of class A common stock for Office Furniture and Equipment with an appraised value of
$______ and Motor Truck with an appraised value of $_____. (Please refer to table below and use only the info in line
with your first name initial in the blank/underlined space).
firstname Initial # of shares issued Office Furniture & Equipment Motor truck
A, P, I, E, V 40% of authorised shares $ 4,000,000.00 $ 10,000,000.00
C, O, R, Y 50% of authorised shares $ 4,000,000.00 $ 10,000,000.00
K, Q, M, F 40% of authorised shares $ 4,000,000.00 $ 10,000,000.00
S, W, G, Z 40% of authorised shares $ 4,000,000.00 $ 10,000,000.00
D, T, L, U 40% of authorised shares $ 4,000,000.00 $ 10,000,000.00
N, B, J, X, H 20% of authorised shares $ 4,000,000.00 $ 10,000,000.00
ACCT1002 Introduction to Financial Accounting
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E. Earned Net income $______. (Please refer to table below and use only the info in line with your first name initial
in the blank/underlined space)
firstname Initial Net Income
A, P, I, E, V $ 1,500,000.00
C, O, R, Y $ 1,800,000.00
K, Q, M, F $ 2,000,000.00
S, W, G, Z $ 1,400,000.00
D, T, L, U $ 1,450,000.00
N, B, J, X, H $ 1,500,000.00
F. Declared interim dividends for preferred shareholders as well as $.80 per share to common stockholders.
Using the info above and as a guide:
A. Prepare the journal entries with narrations to record the following:
• The issuances of stock.
• Close out net income to
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