FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Scenario.
Two graduate students started an appliance business in an area where there is no competition. 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
- State three (3) of the main advantage they gain by selecting a corporate form of business now.
- Would you recommend they initially issue preferred or common stock? Why?
- 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.
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