Solved

[Daria's Bakery] Daria Decided to Open Her Own Bakery

question 64

Multiple Choice

[Daria's Bakery] Daria decided to open her own bakery.She decided she did not need a lawyer to advise her on different forms of ownership.Unfortunately,Daria had not paid attention in business law class.She proceeded to simply open her business called Daria's Bakery.Eli told Daria that he wanted to order some cookies for his girlfriend,Kirsten,but that Kirsten had allergies to peanuts.Daria told him not to worry because she would make up a special batch just for him.Daria had hired some assistants because she was so busy.She told an assistant,Kate,to make up several batches of cookies for different customers including Eli and told her to leave out the peanuts in Eli's batch because of the allergy.Kate,however,forgot about the peanut allergy and proceeded to make Eli's cookies with peanuts.Eli picked up the cookies and gave one to Kirsten in the car.Kirsten became violently ill,vomited in Eli's car,and had to have her stomach pumped.Eli and Kirsten sought recovery from Daria who told them that Kirsten's doctor bill and Eli's car cleaning bill were business debts,that the business was new and not making any money at the moment,and that she had no personal liability.Following the incident involving Eli and Kirsten,Daria discussed her problems with the bakery with her parents.Daria's parents would like to invest in her business and share in any profits,but they do not want to share in the management responsibilities.
-Daria initially set up which type of business?

Definitions:

Paid-in Capital

The total amount of cash and other assets received from shareholders in exchange for stock, including amounts above the nominal value (or par value) of the shares.

Historical Cost Principle

An accounting principle that states assets should be recorded and reported at their original purchase price.

FASB's Proposal

A suggested change or addition to accounting standards published by the Financial Accounting Standards Board.

Employee Stock Options

A privilege, sold by one party to another, that gives the buyer the right, but not the obligation, to buy (call) or sell (put) a stock at an agreed-upon price within a certain period or on a specific date.