As part of the requirements of her university entrepreneurship program, Natalie Koebel had been operating "Cookie Creations," a proprietorship, on a part-time basis. The purpose of Cookie Creations was to provide lessons to whoever wished to learn how to make cookies. For the most part, these lessons took place in people's homes, schools, and community centres. Natalie provided all of the ingredients and utensils required to make cookies. As Natalie approaches her graduation from university, she is considering other opportunities available in addition to operating Cookie Creations.

Natalie's parents, Janet and Brian Koebel, have been operating Koebel's Family Bakery Ltd., a private corporation, for a number of years. They have been overwhelmed with the demand for their cupcakes. They have recently negotiated a contract with a national coffee shop to provide cupcakes on a weekly basis. They have also negotiated a long-term loan to purchase a new piece of equipment.

In anticipation of Natalie graduating, and in hope of spending a little more time away from the bakery, they have discussed with Natalie the possibility of her becoming one of the shareholders of Koebel's Family Bakery Ltd. In addition, Natalie would assume the full-time responsibility of administrator. Natalie could continue to provide cookie-making lessons; however, that would be done by Koebel's Family Bakery in future rather than by Natalie personally.

Instructions

(a) Discuss the benefits and weaknesses of each of these two forms of business organization, Cookie Creations and Koebel's Family Bakery Ltd.

(b) What form of generally accepted accounting principles do you anticipate each of these business organizations is using? Explain.

(c) As Koebel's Family Bakery begins to meet the demands of its new contractual commitment with the national coffee shop, what accounting information will Natalie need as administrator, and why? How oft en will she need this information?

(d) What types of users do you anticipate will use Koebel's Family Bakery's accounting information? What information will these users require?

(e) Identify one example of an operating activity, investing activity, and financing activity that Koebel's Family Bakery would likely be engaged in.