Issue link: http://www.e-digitaleditions.com/i/176211
21st Century Skills Franchise—The Startup Alternative Theme: Financial, Economic, Business, and Entrepreneurial Literacy Skills: ICT Literacy, Critical Thinking and Problem Solving, Information Literacy Entrepreneurs may wish to explore an alternative to starting a business from scratch. Franchising is a popular alternative. A is a right granted to an individual or business to sell the products or services of another, larger business within a defined geographical area. Franchises reduce some risk and often provide training for the franchisor. While others have already paved the way, there is no guarantee of success with a franchise. In addition, since rules are set by the franchisor, many entrepreneurs feel stifled in their ability to be creative. Before considering the purchase of a franchise, the requirements of each company should be researched. Each company sets its own conditions for ownership of a franchise. An example of a condition is the franchise fee. This is the amount of money initially paid to use the franchise name. Another example is the yearly fee for the use of the name, called a royalty fee. A P P L I C ATI ON 1. Use the Internet to investigate five companies currently offering franchises and obtain their franchise and royalty fees. Search individual company websites or sites like www.entrepreneur.com/franzone to obtain the information. Organize your information in a spreadsheet. 2. Imagine that you have the funds to start a new business. Explain whether you would prefer to start a new business from scratch or purchase a franchise. Include the reasons for your preference. Auditing for errors The bookkeeper for The Wellness Center used T accounts to analyze three transactions as follows: Transaction 1: Abu Owusu, Drawing 450.00 Cash 450.00 Transaction 2: Accounts Receivable—Maria Chu 450.00 Sales 450.00 Transaction 3: Supplies 150.00 Accounts Payable—Northstar Supplies 150.00 Review the three sets of T accounts and answer the following questions. 1. Which T account analysis is incorrect? How did you determine it was incorrect? 2. What information would you need to determine the correct T account analysis for this transaction? Analyzing Nike's financial statements The Consolidated Balance Sheets in Appendix B on page B-6 list the assets, liabilities, and shareholders' equity for Nike for 2010 and 2011. Shareholders' equity for a corporation is similar to the capital for a proprietorship because it shows the value of the company to the owners. INSTRUC TIONS Find the total assets, total liabilities, and total equity for Nike for 2011 and 2010. Put your answer in the form of an accounting equation. You will have to add the total current liabilities, long-term debt, deferred income taxes and other liabilities, commitments and contingencies, and redeemable preferred stock to find the total liabilities. Analyzing Transactions into Debit and Credit Parts Chapter 2 55