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Does matter to whether fell- ingham is organized

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Fellingham Software Company has assets of $850,000 and liabilities of $460,000.

Question a. Prepare the owners' equity section of the company's balance sheet under each of the following independent assumptions:

1. The business is organized as a sole proprietorship, owned by Johanna Small.

2. The business is organized as a partnership, owned by Johanna Small and Mikki Yato. Small's equity amounts to $240,000.

3. The business is a corporation with 25 stockholders, each of whom originally invested $10,000 in exchange for shares of the company's capital stock. The remainder of the stockholders' equity has resulted from profi table operation of the business.

Question b. Assume that you are a loan officer at Security Bank. Fellingham has applied to your bank for a large loan to finance the development of new products. Does it matter to you whether Fell- ingham is organized as a sole proprietorship, a partnership, or a corporation? Explain

Reference no: EM132503243

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