Accounting discussion questions
Discussion Question #1-250 words
Tyler Corporation started its operations in March. During the first year of operation, a significant amount of money was spent on attorneys’ fees and promotional expenses connected with organizing the corporation. The amount of revenue Tyler Corporation earned for the year was much higher than expected. Because of this, the accountant decided to charge the attorneys’ fees and promotional expenses to advertising expense in the current year.
1. If the accountant simply was not aware of the proper treatment of these expenditures, were any ethical principles violated? Why or why not?
2. How would you have treated these expenditures?
Your boss started a construction company as a partnership with several other contractors ago. Twelve years later, the partners incorporated to gain access to additional capital by issuing common stock. Forty percent of the shares were sold to the general public, and were acquired by the partners. In this way, the partners kept voting control of the business.
Now the company has an opportunity for a major expansion. To obtain additional capital to fund the expansion, the company is considering another stock offering. But the original partners do not want to lose voting control of the business. Your boss knows you are taking college business courses and asks whether there is a way the company can sell additional stock without the partners losing control of the business. Prepare a report for him describing the kinds of capital stock the company could issue that would accomplish his purpose.