The stockholders€™ meeting for Harris Corporation has been in progress for some time. The chief financial officer for Harris is presently reviewing the company€™s financial statements and is explaining the items that comprise the stockholders€™ equity section of the balance sheet for the current year. The stockholders€™ equity section of Harris Corporation at December 31, 2011, is shown on page 565.

At the meeting, stockholders have raised a number of questions regarding the stockholders€™ equity section.

Instructions
With the class divided into groups, answer the following questions as if you were the chief financial officer for Harris Corporation.
(a) €œWhat does the cumulative provision related to the preferred stock mean?€
(b) €œI thought the common stock was presently selling at $29.75, but the company has the stock stated at $1 per share. How can that be?€
(c) €œWhy is the company buying back its common stock? Furthermore, the treasury stock has a debit balance because it is subtracted from stockholders€™ equity. Why is treasury stock not reported as an asset if it has a debit balance?€
(d) €œWhy is it necessary to show additional paid-in capital? Why not just show common stock at the total amount paidin?€

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HARRIS CORPORATION Balance Sheet (partial) December 31, 2011 Paid in capital Capital stock Preferred stock, authorized 1.000,000 shares cumulative, $100 par value, $8 per share, 6.000 shares issued and outstanding $ 600,000 Common stock, authorized 5,000,000 shares, $1 par value, 3,000,000 shares issued, and 2,700,000 outstanding 3,000,000 3,600,000 Total capital stock Additional paid-in capital In excess of par value -preferred stock In excess of par valuecommon stock S 50,000 25,000,000 25,050,000 28.650.000 900,000 29,550,000 9.300,000 $20,250,000 Total additional paid-in capital Total paid-in capital Retained earnings Total paid-in capital and retained earnings ommon treasury stock (300,000 shares) Total stockholders' equity Less: C