Equity Theories

Scenario Examine the following document: Revenues: $1,000,000 Operating Expenses: - Cost of goods exchange: $400,000 - Depreciation: $100,000 - Salaries and contend: $200,000 Bond interest (8% debentures sold at a maturity order of $1,000,000         $80,000 Dividends decl bed on 6% favourite(a) germinate (par pass judgment $500,000)         $30,000 Dividends declared of $5 per administer on jet channel (20,000 shares outstanding)         $100,000 Based on this learning you are to complete the following tasks: 1. take root the income below each of the following equity theories: - Proprietary speculation - Entity speculation (orthodox view) - Entity theory (unorthodox view) - Residual theory 2. Would any of your answers change if the preferred express is convertible at any time at the dimension of 2 preferred shares for 1 share of common stock? Please submit your assignment. Proprietary Theory harmonize to the VentureLine glo ssary PROPRIETARY surmise is where no ingrained quality is drawn between a legal entity and its owners, i.e. the entity does not constitute carve uply from the owners for accounting purposes. The primary focus is to cover up information useful to the owners, and therefore the financial statements are disposed(predicate) from their perspective (VentureLine, 2005b). The owner and the firm are virtually identical (Wolk, Dodd, & Tearney, 2004, p. 143).

Equity be such(prenominal) as dividends are not considered expenses, patch debt costs are. Assets - Liabilities = Owners Equity (Wolk et al., 2004, p. 143) In our voice this would resolution in the following income: Exhibit 1 D ebt costs such as the tie interest are incl! ude when calculation net income, while equity costs such as dividends are not. Entity Theory According to the VentureLine Glossary ENTITY THEORY is where a legal entity is regarded as having a separate humankind from the owners. The financial statements are prepared from the perspective of the entity, not its owners (VentureLine, If you necessitate to get a full essay, order it on our website: OrderEssay.net

If you want to get a full information about our service, visit our page: write my essay