Assume the following for the year 2000 for the Staubus company:
|
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 a par value of $100 per share) |
100,000 |
(a) Determine the income under each of the following equity theories:
Proprietary theory
Entity theory (orthodox view)
Entity theory (unorthodox view)
Residual equity
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?