Part $1$ Because Natalie has been so successful with Cookie Creations and Curtis has been just as

successful with his coffee shop, they both conclude that they could benefit from each other's business

expertise. Curtis and Natalie next evaluate the different types of business organization, and because of

the advantage of limited personal liability, decide to form a new corporation.

Curtis has operated his coffee shop for $2$ years. He buys coffee, muffins, and cookies from a local

supplier. Natalie's business consists of giving cookie$-$making classes and selling fine European mixers.

The plan is for Natalie to use the premises Curtis currently rents as a location for her cookie$-$making

classes and demonstrations of the mixers that she sells. Natalie will also hire, train, and supervise staff

hired to bake cookies and muffins sold in the coffee shop. By offering her classes on the premises,

Natalie will save on travel, and the coffee shop will provide one central location for selling the mixers.

Combining forces will also allow Natalie and Curtis to pool their resources and buy a few more assets to

run their new business venture.

The $$ rrent market values of the assets of both businesses are as follows.

Curtis and Natalie meet with a lawyer and form their corporation, called Cookie & Coffee Creations

Inc., on November $1,2024.$ The new corporation is authorized to issue $50,000$ shares of $$1$ par common

stock and $10,000$ shares of no par, $$6$ cumulative preferred stock.

The assets held by each business will be transferred into the corporation at current market value of

$$1$ per share. Curtis will receive $10,550$ common shares, and Natalie will receive $14,630$ common shares

in the corporation.

Natalie and Curtis are very excited about this new business venture. They come to you with the

following questions.

Curtis' dad and Natalie's grandmother are interested in investing $$5,000$ each in the new

business venture. Curtis and Natalie are considering issuing them preferred shares. What would

be the advantage of issuing them preferred stock instead of common? Explain your answer.

What would be the advantages and disadvantages of issuing cumulative preferred? Explain your

answer.

"Our lawyer sent us a bill for $$750.$ When we talked the bill over with her, she said she would be

willing to receive common stock in our corporation instead of cash. We would be happy to issue

her stock, but we're worried about accounting for this transaction. Can we do this? If so$,$ how do

we determine how many shares to give her?" Explain your answer.

Instructions

$($a$)$ Answer Natalie and Curtis' questions.