Examine the following document:
Revenues $ 1,000,000
Operating Expenses
- Cost of goods sold $ 400,000
- Depreciation 100,000
- Salaries and wages 200,000
Bond interest (8% debentures sold at maturity value of $1,000,000) 80,000
Dividends declared on 6% preferred stock (par value $500,000) 30,000
Dividends declared of $5 per share on common stock (20,000 shares outstanding) 100,000
Find out the income under each of the given equity theories:
Proprietary theory
Entity theory (orthodox view)
Entity theory (unorthodox view)
Residual theory
Would any of your replies change if preferred stock is convertible at any time at ratio of 2 preferred shares for 1 share of common stock?