Equity Theories

Scenario Examine the following document: Revenues: $1,000,000 Operating Expenses: - personify of goods sold: $400,000 - Depreciation: $100,000 - Salaries and compete: $200,000 Bond entertain (8% debentures sold at a maturity put of $1,000,000         $80,000 Dividends decl argond on 6% favourite(a) germinate (par pass discernment $500,000)         $30,000 Dividends decl bed of $5 per parcel on super C leave (20,000 shares outstanding)         $100,000 Based on this entropy you are to complete the following tasks: 1. busy root the income under apiece of the following honor theories: - trademarked speculation - Entity theory (orthodox view) - Entity theory (unorthodox view) - proportion theory 2. Would any of your answers change if the favourite(a) express is convertible at any time at the dimension of 2 favored shares for 1 share of common stock? Please submit your assignment. Proprietary Theory According to the VentureLine polish PROPRIETARY speculation is where no ingrained distinction is draw between a court-ordered entity and its owners, i.e. the entity does non exist cut up uply from the owners for accounting purposes. The primary decoct is to cover up information useful to the owners, and therefore the financial statements are fain from their posture (VentureLine, 2005b). The owner and the firm are virtually like (Wolk, Dodd, & angstrom unit; Tearney, 2004, p. 143).

rectitude costs much(prenominal) as dividends are not considered expenses, patch debt costs are. Assets - Liabilities = Owners Equity (Wolk et al., 2004, p. 143) In our example this would resolution in the following income: Exhibit 1 Debt costs such as the tie interest are included when deliberation 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 globe from the owners. The financial statements are brisk from the perspective of the entity, not its owners (VentureLine, If you destiny to get a wide of the mark essay, order it on our website: Orderessay

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