Reference no: EM132714754

Problem - Fellingham Software Company has assets of $850,000 and liabilities of $460,000.

a. Prepare the owner's equity section of the company's balance sheet under each of the following independent assumptions:

1. The business is organized as a sole proprietorship, owned by Johanna Small.

2. The business is organized as a partnership, owned by Johanna Small and Mikki Yato, Small's equity amounts to $240,000.

3. The business is a corporation with 25 stockholder's, each of whom originally invested $10,000 in exchange for shares of the company's capital stock. The remainder of the stockholder's equity has resulted from profitable operations of the business.

b. Assume that you are a loan officer at Security Bank. Fellingham has applied to your bank for a large loan to finance the development of new products. Does it matter to you whether Fellingham is organized as a sole proprietorship a partnership or a corporation? Explain.