This is for two accounting questions

1)

DavisCorporation was authorized to issue 100,000 shares of $10 par common stock and 50,000 shares of $50 par, 6 percent, cumulative preferred stock. Davis Corporation completed the following transactions during its first two years of operation.

2012

Jan. 2 Issued 5,000 shares of $10 par common stock for $28 per share.

15 Issued 1,000 shares of $50 par preferred stock for $70 per share.

Feb. 14 Issued 15,000 shares of $10 par common stock for $30 per

Dec. 31 During the year, earned $170,000 of cash service revenue and paid $110,000 of cash operating expenses.

31 Declared the cash dividend on outstanding shares of preferred stock for 2012. The dividend will be paid on January 31 to stockholders of record on January 15,

2013

.

2013

Jan 31 Paid the cash dividend declared on December 31, 2012.

Mar 1 Issued 2,000 shares of $50 par preferred stock for $58 per share.

Jun 1 Purchased 500 shares of common stock as treasury stock at $43 per share.

Dec 31 During the year, earned $210,000 of cash service revenue and paid $175,000 of cash operating expenses

31 Declared the dividend on the preferred stock and a $0.60 per share dividend on the common stock.

Required

a. Organize the transaction data in accounts under an accounting equation.

b. Prepare the stockholders’ equity section of the balance sheet at December 31, 2012.

c. Prepare the balance sheet at December 31, 2013.

2)

Shawn Bates was working to establish a business enterprise with four of his wealthy friends. Each of the five individuals would receive a 20 percent ownership interest in the company. A primary goal of establishing the enterprise was to minimize the amount of income taxes paid. Assume that the five investors are taxed at the rate of 15% on dividend income and 30% on all other in- come and that the corporate tax rate is 30 percent. Also assume that the new company is expected to earn $400,000 of cash income before taxes during its first year of operation. All earnings are expected to be immediately distributed to the owners.

Required

Calculate the amount of after-tax cash flow available to each investor if the business is established as a partnership versus a corporation. Write a memo explaining the advantages and disadvantages of these two forms of business organization. Explain why a limited liability company may be a better choice than either a partnership or a corporation.