Assignment: The board of directors of Akin & Gump, Inc., investment bankers is meeting to address the concerns of stockholders. Stockholders have submitted the following questions for discussion at the board meeting. Answer each question.
Question 1. Why did Akin & Gump organize as a corporation if a corporation must pay an additional layer of income tax?
Question 2. How is preferred stock similar to common stock? How is preferred stock similar to debit?
Question 3. Akin & Gump purchase treasury stock for $50,000 and a year later sold it for $65,000. Explain to the stockholders why the $15,000 excess is not profit to be reported to be reported on the company's income statement.
Question 4. Would our investors prefer to receive cash dividends or stock dividends? Explain your reasoning.