Rukshad Patel, the Owner of a Sole Proprietorship, Is Planning

question 18

Essay

Rukshad Patel, the owner of a sole proprietorship, is planning to incorporate her business. Her capital account has a balance of $200,000 after revaluation of the assets. Her cash account totals $60,000. She will receive 10 percent, $10 par-value preferred stock with a total par value equal to the cash transferred. The balance of her capital is to be exchanged for shares of $2 par-value common stock with a total par value equal to the remaining capital. How many shares of preferred stock should be issued to Patel? How many shares of common stock should be issued to Patel?

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Definitions:

Credit Terms

Conditions under which a seller will extend credit to a buyer, including repayment periods and interest rates.

Merchandise Return

Occurs when customers return previously purchased products to the seller, typically resulting in a refund or store credit.

Account Settlement

The process of reconciling and closing an account by paying off any outstanding balance.

Cost Of Goods Sold

Costs directly connected to the production of a company's sold merchandise.