Drake Company reported the following for 2019: Current assets $87,000 Current liabilities 19,000 Revenues 450,000 Cost of
Question:
Drake Company reported the following for 2019:
Current assets $87,000
Current liabilities 19,000
Revenues 450,000
Cost of goods sold 220,000
Noncurrent assets 186,000
Bonds payable (10%, issued at par) 100,000
Preferred stock, $5, $100 par 20,000
Common stock, $10 par 50,000
Paid-in capital in excess of par 48,000
Operating expenses 64,000
Retained earnings 36,000
Common stockholders received a $2 dividend during the year. The preferred stock is noncumulative and nonparticipating.
Required:
Ignoring income taxes, show net income for the year of 2019 and stockholders equity for Drake Company at December 31, 2019, which is consistent with each of the following theories of equity:
Entity theory
Proprietary theory
Residual equity theory
Explain the above differences in net income and stockholders equity by the theory.
Expert Answer:
Ignoring income taxes show net income for the year of 2019 and stockholders equity for Drake Company ... View the full answer
