Sam Jones, Mary Adams, and Larry Brown have been talking aboutstarting their own business for several years. It will cost $100,000 tostart this business. If they form a partnership, how would yourecommend that they organize?Joe Latte completed a business plan and determines that it will take$120,000 to open a coffee and gelato shop. He has $30,000 of his ownmoney and will have to obtain $90,000 in loans or grants. How shouldJoe go about getting financing. What is the probability that he canobtain a grant to start a combination coffee and Italian ice cream shop?

In summary, Joe needs a diversified approach to secure the needed funds, leveraging loans, potential…

Answered: Sam Jones, Mary Adams, and Larry Brown…

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter13: Choice Of Business Entity—general Tax And Nontax Factors/formation

Section: Chapter Questions

Problem 76TPC

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Joe Latte completed a business plan and determines that it will take$120,000 to open the coffee and gelato shop. He has $30,000 of his ownmoney and will have to obtain $90,000 in loans or grants. How should Joego about getting financing? What is the probability that he can obtain agrant to start a combination coffee and Italian ice cream shop?
john has a great idea to setuo a pie and pastie factory. He needs $200,000 to buy the equipment and to lease suitable prmises for a year. He is not sure whether he should setup a company and issue 200,000 shares to his friends, or else try to borrow $200,000 from a bank to raise those funds. Explain to him the advantages and disadvantages of both alternatives.
Three friends are starting a home painting business while they are in college. One of the friends is from a wealthy family and will finance the startup costs – website development, advertising and purchasing the paint, in return for a 50% share of the business. The other two friends will each own 25% of the business. They may have two or three employees who will be paid by the job and will not own any of the business. They expect to distribute to themselves all the earnings of the business every month. Once they graduate from college, they expect to leave the business and have their brothers and sisters take over. They have no plans to grow the business beyond one or two projects at a time. Which form of ownership should they use as they start up this business?
Now that Tracy has completed her first year in her business, she would like to expand to another location. She has looked at a property near Ft. Lee. She feels this is a prime location since she could provide cupcakes for events and office celebrations at Ft. Lee. She can purchase the property for $48,000 and believes she can build a building with all of the equipment for an additional $148,000. The estimated sales at the new location is $223,000 with a net operating income of $53,000. The minimum acceptable return for these types of investments is 23%. Tracy remembers studying return on investment and residual income from her college classes but needs you to do the calculations and explain what the numbers mean. A.explaining residual income and return on investment on this new venture. B.Calculate both, explain your calculations, and if this will be a good investment for her. Your paper is to be at least one page.
Now that Tracy has completed her first year in her business, she would like to expand to another location. She has looked at a property near Ft. Lee. She feels this is a prime location since she could provide cupcakes for events and office celebrations at Ft. Lee. She can purchase the property for $48,000 and believes she can build a building with all of the equipment for an additional $148,000. The estimated sales at the new location is $223,000 with a net operating income of $53,000. The minimum acceptable return for these types of investments is 23%. Tracy remembers studying return on investment and residual income from her college classes but needs you to do the calculations and explain what the numbers mean. A. explain residual income and return on investment on this new venture. B.Calculate both, explain your calculations, and if this will be a good investment for her. Your paper is to be at least one page.
You graduate and decide you will start a consulting business out of your home. To perform the basic analysis needed for your field, you need to purchase testing equipment. The seller has 2 prices, one for incorporated businesses ($25,000) and one for individuals ($20,000). The salvage value of this equipment after 4 years is predicted to be $10,000 in both cases. You and your partner are debating whether it is better to pay the higher purchase price and be able to depreciate the asset at a CCA rate of 30%, with the corporate tax rate of 40% OR to just keep them as a personal asset, with a sales tax rate of 10% at the time of sale. If we ignore the big picture arguments to be made here, what are the tax implications involved with each purchase/ sale option?
You have determined in your mind that you would like to have a businessof your own, although your father runs a family restaurant in yourlocal city. You have therefore, decided to have a medium size snackand cocktails bar which will accommodate the cruise ship passengerswho visit your city. You plan to keep the business for five yearsafter which you will sell it off to your brother John for $2,000,000and go off to do your Master’s Degree in the UK. Though you will beoccupying the establishment from your grandmother for free, you havedecided that you need to make some improvements to the property whichwill cost you $1,500,000. Additionally, you will spend $275,000 inbar stools, tables and decorations. If this space had been leased out,it would have fetched a lease rental of $75,000 per year. You willdepreciate the assets over 7 years using MACRS. You have determinedthat you would need an average cash balance of $15,000 and inventoryof $20,000 while Accounts payable should average…
You have determined in your mind that you would like to have a businessof your own, although your father runs a family restaurant in yourlocal city. You have therefore, decided to have a medium size snackand cocktails bar which will accommodate the cruise ship passengerswho visit your city. You plan to keep the business for five yearsafter which you will sell it off to your brother John for $2,000,000and go off to do your Master’s Degree in the UK. Though you will beoccupying the establishment from your grandmother for free, you havedecided that you need to make some improvements to the property whichwill cost you $1,500,000. Additionally, you will spend $275,000 inbar stools, tables and decorations. If this space had been leased out,it would have fetched a lease rental of $75,000 per year. You willdepreciate the assets over 7 years using MACRS. You have determinedthat you would need an average cash balance of $15,000 and inventoryof $20,000 while Accounts payable should average…
You have determined in your mind that you would like to have a businessof your own, although your father runs a family restaurant in yourlocal city. You have therefore, decided to have a medium size snackand cocktails bar which will accommodate the cruise ship passengerswho visit your city. You plan to keep the business for five yearsafter which you will sell it off to your brother John for $2,000,000and go off to do your Master’s Degree in the UK. Though you will beoccupying the establishment from your grandmother for free, you havedecided that you need to make some improvements to the property whichwill cost you $1,500,000. Additionally, you will spend $275,000 inbar stools, tables and decorations. If this space had been leased out,it would have fetched a lease rental of $75,000 per year. You willdepreciate the assets over 7 years using MACRS. You have determinedthat you would need an average cash balance of $15,000 and inventoryof $20,000 while Accounts payable should average…
Nicole Mackisey is thinking of forming her own spa business, Nicole's Getaway Spa (NGS). Nicole expects that she and two family members will each contribute $10,000 to the business and receive 1,000 shares each. Nicole forecasts the following amounts for the first year of operations, ending December 31, 2021: Cash on hand and in the bank, $2,250; amounts due from customers from spa treatments, $1,790; building and equipment, $71,000; amounts owed to beauty supply outlets for spa equipment, $4,670; notes payable to a local bank for $38,970. Cash dividends of $3,000 will be paid to the stockholders during the year. Nicole also forecasts that first-year sales revenues will be $43,600; wages will be $24,500; the cost of supplies used up will be $7,500; office expenses will be $5,500; and income taxes will be $1,700. Required: Based on Nicole's estimates, prepare a (forecasted) CREATE A INCOME STATEMENT, RETAINED EARNINGS AND BALANCE SHEET for Nicole's Getaway Spa for the year ended…
Phoebe Jones is now employed as the managing editor of a well-known business journal. Although she thoroughly enjoys her job and the people she works with, what she would really like to do is open a bookstore of her own. She would like to open her store in about eight years and figures she'll need about $ 60,000 in capital to do so. Given that Phoebe thinks she can make about 8 percent on her money. How much would Phoebe have to invest today, in one lump sum, to end up with $60,000 in eight years? Round the answer to two decimal places. $_________________ If she's starting from scratch, how much would she have to put away annually to accumulate the needed capital in eight years? Round the answer to two decimal places. $ __________________ How about if she already has $20,000 socked away, how much would she have to put away annually to accumulate the required capital in eight years? Round the answer to two decimal places. $___________________ Given that Phoebe has…
Patton is considering joining Microtech Enterprises as a partner. The company provides data imaging for a variety of end users. Patton will have to contribute $100,000 of capital upon admission as a partner and will need to decide on a profit-sharing arrangement. Three alternatives are being proposed as follows:Alternative A—Patton will be allocated a salary of $120,000, 10% of average capital after considering withdrawals, and 10% of net income. At the end of each calendar quarter, $30,000 will be distributed to Patton. No additional profits will be allocated to Patton.Alternative B—Patton will be allocated a salary of $96,000, 10% of average capital after considering withdrawals in excess of $60,000, and a bonus of 10% of net income. At the end of the second, third, and fourth calendar quarters, Patton will receive a distribution of $24,000. At the end of the first quarter of the following year, Patton will receive a distribution of $60,000. No additional profits will be allocated to…

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