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 argond on 6% preferable germinate (par pass judgment $500,000)         $30,000 Dividends declared of $5 per theatrical role on honey oil channel (20,000 shares outstanding)         $100,000 Based on this data you are to complete the following tasks: 1. take root the income low 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 handle 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 jibe to the VentureLine glos sary PROPRIETARY possibility is where no ingrained distinction is drawn between a legal entity and its owners, i.e. the entity does not represent 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 like (Wolk, Dodd, & Tearney, 2004, p. 143).

Equity cost such as dividends are not considered expenses, patch debt costs are. Assets - Liabilities = Owners Equity (Wolk et al., 2004, p. 143) In our mannequin this would resol ution in the following income: Exhibit 1 De! bt costs such as the tie interest are include 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 founding from the owners. The financial statements are prepared from the perspective of the entity, not its owners (VentureLine, If you exigency to get a full essay, order it on our website: BestEssayCheap.com

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