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Accounting & Bookkeeping & Small Business Forum
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b*tch
Joined: 02 Jun 2007
Posts: 2
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| Posted: Wed Jun 06, 2007 5:35 pm Post subject: ACCOUNTING GEEKS! HELP ME PLS.. |
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PLS HELP ME SOLVE THIS.ANYONE PLEASE HELP ME ANALYZE EACH ITEM NUMBERED. THANK YOU SO MUCH. I AM CONFUSED WHY #10 CAME UP WITH THAT QUESTION.
I AM LOOKING FORWARD FOR A REPLY FROM THE MEMBERS. I KNOW EVERYONE COULD HELP ME HERE. THANK YOU. THANK YOU. THANK YOU.
1. ian buys mcdonald's franchise from a franchisee for $250,000.
2. purchase price includes franchise fees of $40,000, security deposits on utilities of $1,500. security deposit on store rent of $5000, furniture/fixtures of $62,000 and the balance for goodwill.
3. settlement happens on dec 15, 2004. as such ian also has to reimburse to the seller $500 of prepaid rent and $750 of prepaid insurance.
4. inventory at time of closing is $5,000 of food and $1,000 of supplies. this also needs to be paid to seller at closing.
5. his attorney charges him $500 to set up a new "S" corp with 200 shares with a par value per share of $1.00 and an additional $350 for documents prep and other legal fees.
6. ian also makes sure he has a bank balance of $10,000 in his bank account after all of the above payments clear in the bank.
7. to cover all of the above ian used a bank loan of $200,000, a loan from his friend josh for $25,000 and the remainder from his personal funds.
8. ian also has unreimbursed expenses of $1,250 relating to this purchase.
10. how would the entries be different if this is an LLC.
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marykme
Joined: 15 Dec 2006
Posts: 5
Location: Morris, IL
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| Posted: Thu Jun 07, 2007 8:44 am Post subject: |
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The first question I have is whether Ian, as a franchisee, is forming a LLC or if he is going to operate the business as a sole proprietorship. Is the franchiser a LLC?
If Ian is forming a LLC, he probably, depending on his state's laws, requires a partner.
Regardless, all the categories for assets, liabilities and capital would be the same, except with regards to earnings and investments. If he's operating as a sole proprietor, he would have capital categories of Owner's Investment (changing to Owner's Equity after the first year) and Owner's Draw.
If he's forming a LLC, then, as a corporation, the capital section of the balance sheet would show the corporate categories of Retained Earnings, etc.
Hope this helps.
Mary |
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