Question: Determine the income under each of the following equity theories:
-Proprietary theory
-Entity theory (orthodox view)
-Entity theory (unorthodox view)
-Residual theory
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?
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Examine the following document:
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Revenues
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$ 1,000,000
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Operating Expenses
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- Cost of goods sold
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$ 400,000
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- Depreciation
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100,000
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- Salaries and wages
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200,000
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Bond interest (8% debentures sold at maturity value of $1,000,000)
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80,000
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Dividends declared on 6% preferred stock (par value $500,000)
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30,000
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Dividends declared of $5 per share on common stock (20,000 shares outstanding)
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100,000
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