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# This problem has a value of 10% of the final grade. JumpinJehosaPhats is a haberdashery (Google it!), and is owned by J. Phats. JJ is expanding the...

JumpinJehosaPhats is a small business owned by JJ Phats as the sole proprietor. JJphats is incorporating the business. On January 1, 2012 JumpinJehosaPhats Inc. has been authorized to issue 1,000,000 common shares with a Par Value of \$1. In the process of incorporating, the sole proprietor owner’s equity accounts must be closed and the equity must now reflect a corporate stockholders’ equity account. The books for the Sole Proprietorship indicate the following: JJ Phats deposited \$35,000 to start JumpinJehosaPhats JJ Phats contributed \$50,000 of equipment to start JumpinJehosaPhats Retained Earnings December 31, 2011 = \$150,000 Prepare the Stockholder’s Equity Portion of the Balance Sheet on January 1, 2012.
JumpinJehosaPhats was incorporated on January 1, 2012 and a year later it needs \$10,000,000 to expand operations. JJ Phats is the sole shareholder of the corporation. The corporation is considering three methods to raise the capital: issuing common shares at FMV issuing preferred stock with par = \$1000 issuing 10 year bonds with par = \$1000 You have been hired to determine the best way for the company to obtain the funds needed which might be a single method or combination of methods. Using the following information, discuss the pros and cons of each method and provide necessary calculations to support the position you recommend. The company is authorized to issue 1,000,000 shares with a par value of \$1.00 On January 1, 2013 an appraisal of the company indicates that it has a current value of \$25,000,000. On January 1, 2013 current interest rates are 3.5% APR and rising. On December 1, 2012 the competition (LeapinLizards Inc) issued 10,000 ten year cumulative preferred shares with par = \$1000 at 3.4%
Comprehensive Problem 4: Part 4 Bailey's Chocolates has provided statements of retained earnings, income statements, and balance sheets for the months of January and February 2012. The company wants you to calculate the cash flow from operating activities for the period ending February 2012 using the indirect method. Using the Indirect Method produce a Cash Flow from Operating Activities. Cash Flows from Operating Activities (Indirect Method) Net Cash Flow from Operating Activities
Bailey's Chocolates Bailey's Chocolates Income Statement Income Statement Bailey's Chocolates Month Ending January 31, 2012 Month Ending February 29, 2012 Statement of Retained Earnings Month Ending January 31, 2012 Revenue \$20,000 Revenue \$23,000 Cost of Good Sold (5,000) Cost of Good Sold (7,000) Retained earnings, January 1, 2012 \$- Gross Margin \$15,000 Gross Margin \$16,000 Net Gain, January 31, 2012 \$9,930 Expenses Expenses Salary Expense 900 Salary Expense 1,000 Less Withdrawals - Supplies Expense 20 Supplies Expense 30 Increase in Retained Earnings \$9,930 Office Equipment Expense 200 Office Equipment Expense 225 Retained earnings, January 31, 2012 \$9,930 Rent Expense 1,000 Rent Expense 1,000 Insurance Expense 100 Insurance Expense 100 Interest Expense-Note 100 Interest Expense-Note 100 Interest Expense-Mortgage 1,000 Interest Expense-Mortgage 1,000 Bailey's Chocolates Depreciation Expense-Building 1,500 Depreciation Expense-Building 1,500 Statement of Retained Earnings Depreciation Expense-Equipment 250 Depreciation Expense-Equipment 250 Month Ending February 29, 2012 Total Expenses \$5,070 Total Expenses \$5,205 Net Income \$9,930 Net Income \$10,795 Retained earnings, February 1, 2012 \$9,930 Net Gain, February 1, 2012 \$10,795 \$20,725 Bailey's Chocolates Bailey's Chocolates Less Withdrawals (Dividends) \$(9,930) Balance Sheet Balance Sheet Increase in Retained Earnings \$10,795 Month Ending January 31, 2012 Month Ending February 29, 2012 Retained earnings, February 29, 2012 \$10,795 Assets Liabilities Assets Liabilities Current Assets Current Liabilities Current Assets Current Liabilities Cash \$85,260 Accounts Payable \$3,500 Cash \$90,000 Accounts Payable \$3,200 Accounts receivable 10,600 Salary Payable 200 Accounts receivable 10,875 Salary Payable 150 Inventory 3,220 Total Current Liab \$3,700 Inventory 2,750 Total Current Liab \$3,350 Supplies 150 Supplies 120 Prepaid Office Equipm 150 Long-Term Liabilities Prepaid Office Equipm 100 Long-Term Liabilities Prepaid Rent 1,500 Notes Payable \$48,000 Prepaid Rent 500 Notes Payable \$48,000 Security Deposit 1,500 Int Pay-Note 400 Security Deposit 1,500 Int Pay-Note 500 Prepaid Insurance 400 Mortgage Payable 480,000 Prepaid Insurance 300 Mortgage Payable 480,000 Total Current Assets \$102,780 Int Pay-Mort 2,000 Total Current Assets \$106,145 Int Pay-Mort 3,000 Total LT Liabilities \$530,400 Total LT Liabilities \$531,500 Property, Plant & Equipment Total Liabilities \$534,100 Property, Plant & Equipment Total Liabilities \$534,850 Building 500,000 Building 500,000 Acc Dep-B (1,500) 498,500 Shareholder's Equity Acc Dep-B (3,000) 497,000 Shareholder's Equity Equipment 9,000 Common Stock \$6,000 Equipment 9,000 Common Stock \$6,000 Acc Dep-E (250) 8,750 APIC-Common 60,000 Acc Dep-E (500) 8,500 APIC-Common 60,000 Total PP & E \$507,250 Retained Earnings 9,930 Total PP & E \$505,500 Retained Earnings 10,795 Total Equity \$75,930 Total Equity \$76,795 Total Assets \$610,030 Total Liab & Equity \$610,030 Total Assets \$611,645 Total Liab & Equity \$611,645

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