Scenario:

Steve Osbourne is considering opening a business, but the major decision faced is how to organize the business. Steve anticipates generating a massive profit during the first year and that the following years should be relatively profitable. Although he has enough to start the business now as a partnership, he believes cash flow may be an issue as the company grows. Steve believes that the corporate form of operation will be his best option and have hired you as a consultant and seek your advice.

Requirements:

1. Answer the following questions for Steve.

1. Explain the corporate characteristic termed no mutual agency

2. Explain the corporate characteristic termed limited liability.

3. Explain the term outstanding stock.

4. Is it true or false that corporations muse issue common stock, but may or may not decide to issue preferred stock?

5. Is it true or false that all forms and classes of stock carry voting rights?

6. Is it true of false that stock sold for amounts in excess of par value results in a gain reported on the income statement?

2. The company is desirous of comparing serval financial transactions and possible outcomes to assist in guiding its decision-making process. It is assumed that the company will be formed on January 1, 2021 and registered as Osbourne Corporation. The companys charter will authorize 1,000,000 shares of common stock and 400,000, $100 par value, 5% cumulative preferred stock. They have asked each student from your accounting course to prepare the companys journal entries and statement of owners equity based on the following information which is grouped according to your surname name initial. (Hint!!!! Example surname Manuel will use the initial M and that person should only use the info presented in line with the heading with their surname initial. You are not allowed to use info associated other initials other than that of your own as this will result in the forfeiture of the grade.) (Please to rules above on double-barrel surnames)

• Issued 65,000 shares of common stock. Stock has par value of $0.40 per share and was issued at $30.00 per share.
• Issued 10,000 shares of preferred stock at par value as payment in exchange for legal services.
• Exchanged 200,000 shares of common stock for land with an appraised value of $500,000.00 and a building with an appraised value of $700,000.00.
• Earned Net income $750,000.00.
• Paid dividends to preferred shareholders as well as $2 per share to common stockholders.

Using the info above and as a guide:

1. Prepare the journal entries with narrations to record the following:

• The issuances of stock.
• Close out net income to retained earnings.
• Dividend paid.
• Close out dividend to retained earnings.

2. Prepare Osbourne Corporation Stockholders equity section of the balance sheet at December 31, 2021. (Hint!!!!!!!) The following information must be clearly stated/shown:
   • information on par values,
   • the number of shares authorized and issued where necessary.
   • the sub total for the total paid in capital.
   • Retained earnings.
   • total stockholders equity.