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Part 1 Mindy Feld, Kamp and her two colleagues, O...




Part 1 Mindy Feld, Kamp and her two colleagues, Oscar Lopez and Lori Melton, are personal trainers at an upscale health spa/resort in Tampa, Florida. They want to star a health club that specializes in health plan for people in the 50+ age range. The growing population in this age range and strong consumer interest in the health benefits of physical activity have convinced them they can profitably operate their own club. In addition to many other decisions, they need to determine what type of business organization they want. Oscar believes there are more advantages to the corporate form than partnership, but he hasn't yet convinced Mindy and Lori. They have come to you, a small business consulting specialist, seeking information and advice regarding the choice of staring a partnership versus a corporation. Instructions (a) Prepare a memo(dated May 26, 2007) that describes that advantages and disadvantages of both partnerships and corporations. Advice Mindy, Oscar and Lori regarding which organizational form you believe would better serve their purposes. Make sure to include reasons to supporting your advice. part 2 After deciding to incorporate, each of the three investors receives 20,000 shares of $2 per common stock on June 12,2007,in exchange for their co-owned building($200,000 market value) and $100,000 total cash they contributed to the business. The next decision that Mindy, Oscar and Lori need to make is how to obtain financing for renovation and equipment. they understand the tax, net income, and earning per share consequences of equity versus debt financing on the future of their business. Instructions (b) Prepare notes for a discussion with the three entrepreneurs in which you will compare the consequences of using equity versus debt financing . As part of your notes, show the differences in interest and tax expense assuming $1,400,000 is financed with common stock is used, 140,000 shares will be issued. when debt is used, assume the interest rate on debt is 9%, the tax rate is 32%, and income before interest and taxes is $300,000.(You may want to us an electronic spreadsheet.) Part 3 During the discussion about financing, Lori mentions that one of her clients, Roberto Marino, has approached her about buying a significant in trust in the new club. Having an interested investor sways the three o issue equity securities to provide the financing they need. On July 21,2007, Mr. Marino buys 90,000 shares at the price of $10 per share. The club, LifePath Fitness, opens on January 12, 2008, and after a slow start, begin to produce the revenue desired by the owners. They decide to pay themselves a stock dividend, since cash has been less abundant since they opened their doors. The 10% stock dividend is declared by the owners on July 27, 2008. The market value of the stock is $3 on the declaration date. The date record is July 31, 2008(there have been no change in the stock ownership since the initial issuance), and the issue date is August 15, 2008. By the middle of the fourth quarter of 2008, the cash flow of LifePath Fitness has improved to the point that the owners feel ready to pay themselves cash dividend. They declare a $0.05 cash dividend on December 4, 2008. The record date is December 14, 2008, and the payment date is December 24, 2008. Instructions (c) (1) Record all of the transaction related to the common stock of LifePath Fitness during the year 2007 and 2008.(2) Indicate how many shares are issued and outstanding after the stock dividend is issued. Part 4 since the club opened, a major concern has been the pool facilities. Although the existing pool is adequate, Mindy, Oscar and Lori all desire to make LifePath a cutting-edge facility. Until the end of 2008, financing concerns prevented this improvement. However, because there has been steady growth in clientele, revenue, and income since fourth quarter of 2008, the owner have explored possible financing options. They are hesitant to issue stock and change the ownership mix because they have been able to work together as a team with great effectiveness. They have formulated a plan to issue secured term bonds to raise the needed $600,000 for the pool facilities. By the end of April 209 everything was in place for the bond issue to go ahead. On June 1, 2009, the bond were issued for $548,000.The bond pay semiannual interest of 3% (6% annual) December 1 and June 1 of each year. The bond mature in 10 years, and amortization computed using the straight-line method. Instructions (d) Record(1) the issuance of the secured bonds,(2) the interest payment made on December 1, 2009(3) the adjusting entry required at December 31,2009, and (4) the interest payment made on june1,2009. Part 5 Mr. Marino?s purchase of LifePath Fitness was done through his business. The investment has always been accounted for using the cost method on his firm's books. However, early in 2010 he decided to take his company public. He preparing an IPO(initial public offering), and he needs to have the firm's financial statement audited method, since Mr. Marino?s ownership percentage is greater that 20%. Instructions (e) (1) Give the entries that would have been made on Marino's book if the equity method of accounting for investments had been used since the initial investment. Assume the following date for LifePath. 2007 2008 2009 Net income $30,000 $70,000 $105,000 total cash dividend $2,100 $20,000 $50,000 (2) Compute the balance in the LifePath Investment account at the end of 2009,For now i have agreed to pay $60.00 If the questions are well answered i will add a bonus,i can not find answers to my questions . i have bee ask to download accounting xis .i did . i need this answers now orelese it will be meaningless,i can not find answers to my questions . i have bee ask to download accounting xis .i did . i need this answers now orelese it will be meaningless,i can not find answers to my questions . i have bee ask to download accounting xis .i did . i need this answers now orelese it will be meaningless,i can not find answers to my questions . i have bee ask to download accounting xis .i did . i need this answers now orelese it will be meaningless


Paper#9617 | Written in 18-Jul-2015

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