First Case:

Adria Lopez created Success Systems on October 1, 2013. The company has been successful, and Adria plans to expand her business. She believes that an additional $86,000 is needed and is investigating three funding sources.

a. Adrias sister Cicely is willing to invest $86,000 in the business as a common shareholder. Since Adria currently has about $129,000 invested in the business, Cicelys investment will mean that Adria will maintain about 60% ownership, and Cicely will have 40% ownership of Success Systems.

b. Adrias uncle Marcello is willing to invest $86,000 in the business as a preferred shareholder. Marcello would purchase 860 shares of $100 par value, 7% preferred stock.

c. Adrias banker is willing to lend her $86,000 on a 7%, 10-year note payable. She would make monthly payments of $1,000 per month for 10 years.

Please do the following:

1. Prepare the journal entry to reflect the intial $86,000 investement under each of the options (a), (b), and (c).

2. Evaluate the three proposal for expansion, providing the pros and cons for each option

3. Which option do you recommend Adria adopt? Explain

Second Case:

Debit Credit Prob. # | Account 1a 1b 1c Note 1.2: 1.3