Assume the following for the year 2000 for the Staubus Company: Revenues Operating expenses Cost of goods sold Depreciation Salaries and wages Bond interest (8% Debentures sold at maturity value of $1,000,000) Dividends declared on 6% Preferred Stock (par value $500,000) Dividends declared of $5 per share on Common Stock (20,000 shares outstanding, a par value of $100 per share) $1,000,000 $400,000 $100,000 $200,000 $80,000 $30,000 $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 b. 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?
