Course Assessment

Related Course Objectives:

. • Identify the characteristics of a corporation

• Describe the two sources of stockholders’ equity and the classes of stock

• Journalize the issuance of stock and prepare the stockholders’ equity section of a corporation balance sheet

• Illustrate Retained earnings transactions

• Account for cash dividends

Assignment Description and Instructions

In this scenario, you are presented with the company’s financial records and are required to use the principles learned in units 7 to assist you in presenting the required answers. This is an individual activity which requires vigilance and a keen eye for details will be crucial as the information presented will challenge your ability to use good reasoning and critical thinking to analyze the financial data presented. There should be absolutely no sharing of answers as this carries a penalty to include forfeiture of marks for the guilty parties if this is identified. You are required to only use the figures in line with your first name initial as any other info used will result in the loss of marks. Answers must be typed in an Excel or Word document.

Scenario:

Karen and Yanique are opening a jewellery store with no competition in the area from which they intend to operate their business. Their fundamental decision is how to organize the business. They anticipate super profits 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 and as such, they feel the corporate form of operation will be best for the long term. They seek your advice.

Requirements:

1. State three (3) of the main advantage they gain by selecting a corporate form of business now.

2. Would you recommend they initially issue preferred or common stock? Why?

3. If the corporation when formed sets a par value for its shares low and issue common stock for a price above par, what is this amount above par called? Can this amount be treated as a gain, income, or profit for the corporation? Please give the reason for your answer.

4. Assume one year later (2019) the company KY Jeweller’s Ltd has been formed and the owners are desirous of companying several financial transactions and possible outcomes to assist in guiding their decision-making process. They have asked each student from your accounting course to prepare the company’s journal entries and statement of owner’s equity based on the following information which is grouped according to your fist name initial. (Hint!!!! Example fist name Michael 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.)

The company’s charter authorizes 1,000,000 shares of common stock and 100,000 shares of preferred stock and the following are the transactions for consideration:

1. KY Jewelers purchased a piece of land from the original owner. In payment for the land, KY Jewelers issues ___ (please refer to table below and use only the info in line with your fist name initial) shares of common stock with $1.00 par value. The land has been appraised at a market value of ____ (Please refer to table below for land value under the category with your first name initial).

First Name Initial	# of shares issued	Value of land
A, P, I, E, V	300,000	$1,200,000
C, O, R, Y	350,000	$1,350,000
K, Q, M, F	380,000	$1,500,000
S, W, G, Z	400,000	$1,480,000
D, T, L, U	410,000	$1,560,000
N, B, J, X, H	390,000	$1,520,000

2. The company sold ___ (please refer to table below and use only the info in line with your fist name initial) shares of common stock with $1 par value.

First Name Initial	# of shares issued
A, P, I, E, V	120,000
C, O, R, Y	110,000
K, Q, M, F	150,000
S, W, G, Z	110,000
D, T, L, U	155,000
N, B, J, X, H	140,000

3. Issued ___ (please refer to table below and use only the info in line with your fist name initial) shares of $___ (please refer to table below and use only the info in line with your fist name initial) par value preferred stock. Shares were issued at par.

First Name Initial	# of shares issued	Par value
A, P, I, E, V	25,500	$20
C, O, R, Y	22,000	$18
K, Q, M, F	23,000	$16
S, W, G, Z	24,000	$14
D, T, L, U	25,000	$19
N, B, J, X, H	26,000	$22

4. Earned net income of $___ (please refer to table below and use only the info in line with your fist name initial).

First Name Initial	Net Income
A, P, I, E, V	$764,000
C, O, R, Y	$850,000
K, Q, M, F	$940,000
S, W, G, Z	$1,000,000
D, T, L, U	$880,000
N, B, J, X, H	$950,000

5. Dividend declared and paid - $0.15 per share on common stock

6. Dividend declared and paid - $5 per share on preferred stock

Using the information above and as guided:

1. Prepare the Journal entries and closing entries for the above transaction

2. Prepare the owner’s equity section of the balance sheet based on the info above.

Answer rating: 100% (QA)

1 aThey can get higher funds for the business by issuing shares b liability ... View the full answer