The stockholders' meeting for Strauder Corporation has been in progress for some time. The chief financial officer for Strauder 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 Strauder Corporation at December 31, 2010, is as follows.

At the meeting, stockholders have raised a number of questions regarding the stockholders' equity section.InstructionsWith the class divided into groups, answer the following questions as if you were the chief financial officer for Strauder 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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STRAUDER CORPORATION Balance Sheet (partial) December 31, 2010 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 Common stock, authorized 5,000,000 shares, $1 par $ 600,000 value, 3,000,000 shares issued, and 2,700,000 outstanding 3,000,000 Total capital stock Additional paid-in capital In excess of par value-preferred stock In excess of par value-common stock Total additional paid-in capital 3,600,000 50,000 25,000,000 25,050,000 Total paid-in capital Retained earnings 28,650,000 900,000 Total paid-in capital and retained earnings Less: Common treasury stock (300,000 shares) 29,550,000 9,300,000 $20,250,000 Total stockholders' equity