Reference no: EM132709357
Stan Sewell paid $50,000 to have a business which allowed him to market software applications in the countries of the European Union. Sewell planned to sell individual companies for the main language groups of Western Europe-German, French, English, Spanish, as well as Italian. Obviously, investors thinking about buying a company from Sewell asked to see the financial statements of his organization.
Supposing the price of the company to be $500,000, Sewell wanted to capitalize his own company at $500,000. The law company of St. Charles & LaDue assisted Sewell create a corporation chartered to issue 500,000 shares of common share with par value of $1 for each share.
Lawyers recommended the following series of dealings:
- Sewell's relative, Bob, borrows $500,000 from a bank and buys the company from Sewell.
- Sewell pays the corporation $500,000 to get all its shares.
- The corporation purchases the company from Cousin Bob.
- Cousin Bob repays the $500,000 loan to the bank.
In the bottom line, Cousin Bob is debt-free and away from the picture. Sewell has all the corporation's shares, and the corporation has the franchise. The corporation's balance sheet lists a franchise purchased for $500,000. This balance sheet is Sewell's most effective marketing strategy.
Requirements
Question 1: What is unethical about this situation?
Question 2: Who can be harmed? How can they be harmed? What role does accounting play?
|
Identify the specific concept from psychosocial theory
: Identify the specific concept from psychosocial theory that supports the use of this activity. Identify how the activity enhances psychosocial development.
|
|
How can a business protect against the kind of fraud
: Was Frank's company hurt in any way by this fraudulent action? How can a business protect against this kind of fraud? How could this action hurt Frank?
|
|
What is the effect on the corporation revenue of the period
: Problem - The treasury stock in Question 14 is resold for $2,400,000. What is the effect on the corporation's revenue of the period
|
|
What effect does it have on stockholders equity
: A corporation reacquires 18,000 shares of its own $50 par common stock for $2,250,000, recording it at cost. What effect does it have on stockholders equity
|
|
What role does accounting play
: Stan Sewell, What is unethical about this situation? Who can be harmed? How can they be harmed? What role does accounting play?
|
|
Was the amount of cash received from the sale of the bonds
: A corporation issues $40,000,000 of 6% bonds to yield an effective interest rate of 8%. Was the amount of cash received from the sale of the bonds
|
|
Discuss cash dividends and stock dividends
: When each is issued, what is the affect on assets, liabilities and owner's equity? How is each recorded? Discuss cash dividends and stock dividends.
|
|
What amount will be recorded as cash dividends
: If the corporation declares a $2-per-share cash dividend, what amount will be recorded as cash dividends
|
|
Journalize the declaration of the payment on january
: Journalize the declaration of the 2012 dividends on December 22, 2012, and payment on January 14, 2013. Use separate Dividends payable accounts
|