George Campbell paid $50,000 for a franchise that entitled him to market Success Associates software programs in

Question:

George Campbell paid $50,000 for a franchise that entitled him to market Success Associates software programs in the countries of the European Union. Campbell intended to sell individual franchises for the major language groups of Western Europe German, French, English, Spanish, and Italian. Naturally, investors considering buying a franchise from Campbell asked to see the of his business.
Believing the value of the franchise to be greater than $50,000, Campbell sought to capitalize his own franchise at $500,000. The law firm of McDonald & LaDue helped Campbell form a chartered to issue 500,000 shares of with of $1 per share. Attorneys suggested the following chain of transactions:
a. A third party borrows $500,000 and purchases the franchise from Campbell.
b. Campbell pays the $500,000 to acquire all its stock.
c. The buys the franchise from the third party, who repays the loan.
In the final analysis, the third party is debt-free and out of the picture. Campbell owns all the corporations stock, and the owns the franchise. The lists a franchise acquired at a cost of $500,000. This is Campbell’s most valuable marketing tool.

Requirements
1. What is the ethical issue in this situation?
2. Who are the to the suggested transaction?
3. Analyze this case from the following standpoints:
(a) Economic
(b) Legal
(c) Ethical.
What are the consequences to each stakeholder?
4. How should the transaction be reported?

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Stakeholders
A person, group or organization that has interest or concern in an organization. Stakeholders can affect or be affected by the organization's actions, objectives and policies. Some examples of key stakeholders are creditors, directors, employees,... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...