(a) Dawn will likely operate her vegetable stand as a proprietorship
because she is planning on operating it for a short time period and a
proprietorship is the simplest and least costly business organization
to form and dissolve.
(b) Joseph and Sabra should form a corporation when they combine their
operations. This is the best form of business for them to choose
because they plan to raise funds in the coming year. It is easier to
raise funds in a corporation. A corporation may also receive more
favourable income tax treatment.
(c) The professors should incorporate their business because of their
concerns about the legal liabilities. A corporation is the only form of
business that provides limited liability to its owners.
(d) Abdur would likely form a corporation because he needs to raise
funds to invest in inventories and property, plant, and equipment. He
has no savings or personal assets and it is normally easier to raise
funds through a corporation than through a proprietorship or
(e) A partnership would be the most likely form of business for Mary,
Richard and Jigme to choose. It is simpler to form than a corporation
and less costly. PROBLEM 1-10A
(1) Cash = Total assets – (Accounts receivable + Land + Building
Cash = $85,000 – ($20,000 + $15,000 + $45,000)
Cash = $5,000
(2) Total assets = Total liabilities and sh