In Good Company

The waitress set down a plate of nachos and two pints of beer in front of Stan and his old college buddy, Ron Ebbers. Ever since theyd run into each other at Stans Subway restaurant, the two had rekindled their friendship over beer and nachos at a local restaurant.

Sales still on the up and up? Ron asked Stan. Yep. It just doesnt seem to matter how weak the economy is, said Stan. People will always want a sandwich thats healthy, great-tasting, and a good value.

And now, Stan lifted a glass, salua toastbecause as of today Im a corporation! Cheers, Stan the Man! exclaimed Ron and clinked Stans beer mug. But doesnt incorporating cost you more money in legal fees and taxes? Well, that may be true, but if I dont incorporate and anything goes wrong or some wacko sues me, it could cost me my shirt! Now I have limited liability, but I still pay wages to my employees, send in my royalty fees to Subway, and muchos profits still go to me.

Maybe I should buy stock in Subway, Ron interrupted. Ive been dabbling in the market lately and Subway seems like a good bet! Unfortunately, you cant buy stock in Subway, said Stan. Doctors Associates, the corporation that owns the Subway brand, is privately owned by the founders Fred DeLuca and Dr. Peter Buck.

Doctors Associates? Stan exclaimed. Thats strange. I know the food has helped people lose weight and eat healthily, but is Subway run by a health-care outfit?

No, its actually kind of interesting. In 1965 Fred DeLuca was just a teenager who wanted to go to college and become a doctor, but he didnt have enough money.

Then his family friend, Peter Buck, loaned him the money to start a submarine sandwich joint. DeLuca, of course, never did become a doctor, but Peter Buck holds a Ph.D. in nuclear physics, so they called themselves Doctors Associatestheyre the doctors and we franchisees are the associates.

I guess we all have dreams that we dont carry out, Ron mused. Hey, dont look so triste, amigo. I know youre stuck in a dead-end job now, but maybe now is the time to think about new opportunities.

Whaddaya mean? Ron asked.

Theres a great space on Alameda Avenue on the other side of Los Palmosnear that fancy new apartment complex. Ive been thinking of eventually opening up another store, but I dont want to go it alone. However, I might consider going into a partnership with you to own Subway number 2.

Well, given the liability risks you just mentionedwhich I assume apply to partnerships as well as sole proprietorships, what about a corporation? said Ron eagerly. You could be the majority shareholder and I could have a smaller interest in the restaurant until I learn the ropes and eventually buy you out.

Whoa there. Lets not talk about buying anyone out just yet, laughed Stan. Before you do anythingif youre serious about being a Subway owneryoull need to go to Subway University.

Ron raised his glass, Salute.

No man, salud, corrected Stan. A toast. To opportunidades del futuro y amistad. To future opportunities and friendship.

Tasks

1. From the following partial mixed list, select the appropriate titles and prepare a stockholders equity section using the source-of-capital approach as shown in the Blueprint example for Ununoctium Corporation on July 31, 201X.

Office Equipment	$110,000
Land	215,000
Paid-In Capital in Excess of Par Value-Preferred Stock	85,000
Building	70,000
Accounts Receivable	135,000
Notes Receivable	38,000
Organization Costs	10,500
Common Stock, $8 par value (60,000 shares issued and outstanding; 85,000 shares authorized)	81,000
Retained Earnings	200,000
Subscriptions Receivable-Common Stock	81,000
Patents	12,000
Preferred 17% Stock, $49 par value (6000 shared issued; 8,500 shared authorized)	294,000
Common Stock Subscribed at Par	240,000
Paid-In Capital in Excess of Par Value-Common Stock	17,000