Question

The stockholders’ meeting for Percival Corporation has been in progress for some time. The chief financial officer for Percival 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 Percival Corporation at December 31, 2014, is as follows.

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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 Percival Corporation.
(a) “What does the cumulative provision related to the preferred stock mean?”
(b) “I 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) “Why 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 debitbalance?”


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  • CreatedJanuary 30, 2014
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