Answer the following questions to enhance your understanding of the shareholders' equity of corporations:
1. Why do you think contributed capital and retained earnings are shown separately in the shareholders' equity section?
2. Vivien Chan, major shareholder of Nah Inc., proposes to sell some land she owns to the company for common shares in Nah Inc. What problem does Nah Inc. face in recording the transaction?
3. Preferred shares generally have preference over common shares for dividends and on liquidation. Why would investors buy common shares when preferred shares are available?
4. If you owned 100 shares of Tim Hortons Inc. and someone offered to buy the shares for their book value, would you accept the offer? Why or why not?
5. What is a convertible preferred share? Why would an investor exercise the conversion privilege?