Accounting Homework Help

Instructions

Cookie Creations (Chapter 13)This assignment is a continuation of the Cookie Creations case study. From the information gathered in the previous chapters, read the continuation of the Cookie Creations case study in Chapter 13 on page 13-32 of the textbook. The case study allows you to apply what you have learned about corporations and stocks from the unit lesson and required unit resources. Natalie’s friend Curtis Lesperance decides to meet with Natalie after hearing that her discussions about a possible business partnership with her friend Katy Peterson have failed. Natalie had decided that forming a partnership with Katy, a high school friend, would hurt their friendship. Natalie had also concluded that she and Katy were not compatible to operate a business venture together. Because Natalie has been so successful with Cookie Creations and Curtis has been just as successful with his coffee shop, they both conclude that they could benefit from each other’s business expertise. Curtis and Natalie next evaluate the different types of business organization. Because of the advantage of limited personal liability, they decide to form a corporation. Curtis has operated his coffee shop for 2 years. He buys coffee, muffins, and cookies from a local supplier. Natalie’s business consists of giving cookie-making classes and selling fine European mixers. The plan is for Natalie to use the premises that Curtis currently rents to give her cooking-making classes and demonstrations of the mixers that she sells. Natalie will also hire, train, and supervise staff to bake the cookies and muffins sold in the coffee shop. By offering her classes on the premises, Natalie will save on travel time going from one place to another. Another advantage is that the coffee shop will have one central location for selling the mixers. 

1. Curtis’s dad and Natalie’s grandmother are interested in investing $5,000 each in the business venture. We are thinking of issuing them preferred shares. What would be the advantage of issuing them preferred shares instead of common shares?
2. Our lawyer has sent us a bill for $750. When we discussed the bill with her, she indicated that she would be willing to receive common shares in our new corporation instead of cash for her services. We would be happy to issue her shares, but we are a bit worried about accounting for this transaction. Can we do this? If so, how do we determine how many shares to give her?

Instructions:

1. In a Word document, answer the questions posed by Natalie and Curtis above.
2. In an Excel spreadsheet, prepare the journal entries required on November 1, 2020, the date when Natalie and Curtis transfer the assets of their respective businesses into Cookie & Coffee Creations Inc.
3. Assume that Cookie & Coffee Creations Inc. issues 1,000 $0.50 noncumulative preferred shares to Curtis’s dad and the same number to Natalie’s grandmother—in both cases for $5,000. Also assume that Cookie & Coffee Creations Inc. issues 750 common shares to its lawyer.
4. Prepare the journal entries for each of these transactions. They all occurred on November 1. Prepare the opening balance sheet for Cookie & Coffee Creations Inc. as of November 1, 2020, including the journal entries in (b) and (c) above.

Provide your responses to Natalie and Curtis’s two questions in a Word document, which should be a minimum of one page in length. Complete the accounting for items b–d in one Excel spreadsheet; you may use multiple tabs to organize your response. In summary, you will submit one Word document containing item a and one Excel spreadsheet containing items b–d.