Lena Kay and Kathy Lauder have a patent on a new line of cosmetics$.$ They need additional capital to market the products, and they plan to incorporate the business. They are considering the capital structure for the company. Their primary goal is to raise as much capital as possible without giving up control of the business. Kay and Lauder plan to invest the patent $($an intangible asset, which will be transferred to the company$$s ownership in lieu of cash$)$ in the company and receive $100000$ ordinary shares. They have been offered $$100000$ for the patent, which provides an indication of the fair market value of the patent. The company$$s plans include the issue of up to $5000$ preference shares and up to $500000$ ordinary shares. Kay and Lauder are uncertain about the most desirable features for the preference shares. Prior to incorporating, they are discussing their plans with two investment groups. The company can obtain capital from outside investors under either of the following plans:

Plan $1.$ Group $1$ will invest $$150000$ to acquire $1500$ non$-$voting, non$-$cumulative, preference shares with an annual dividend entitlement of $$6$ per share.

Plan $2.$ Group $2$ will invest $$100000$ to acquire $1000$ preference shares and $$70000$ to acquire $70000$ ordinary shares. Each preference share receives $50$ votes on matters that come before the shareholders.

Requirements

Assume that the company has been registered.

$1)$ Journalise the issue of ordinary shares to Lena Kay and Kathy Lauder. Explanations aren$$t required.

$2)$Journalise the issue of shares to the outsiders under both plans. Explanations aren$$t required.

$3)$Profit for the first year is $$180000$ and total dividends are $$30000.$ Prepare the shareholders$$ equity section of the company$$s balance sheet under both plans.

$4)$Recommend one of the plans to Lena Kay and Kathy Lauder. Give your reasons.