|
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
|
|
|
|
80,000
|
|
maturity value of $1,000,000)
|
|
|
|
|
|
Dividends declared on 6% preferred stock
|
|
|
|
30,000
|
|
(par value $500,000)
|
|
|
|
|
|
Dividends declared of $5 per share on
|
|
|
|
100,000
|
|
common stock (20,000 shares outstanding)
|
|
|
|
|
On the basis of the above information...... Complete the following tasks:
Problem 1. Determine the income under each of the following equity theories:
o Proprietary theory.
o Entity theory (orthodox view)
o Entity theory (unorthodox view)
o Residual theory
Problem 2. Would any of your answers change if the preferred stock is convertible at any time at the ratio of 2 preferred shares for 1 share of common stock?