Unit 2 Individual Project
Presented in Partial Fulfillment
Of the Requirements for the Class
ACG 450 Advanced Topics in Accounting
By
Jason T. Rose
AIU Online
24 November 2005
1. Determine the income under each of the following equity theories:
o Proprietary theory
Net Income = Operating margin Interest expense
= $300,000 - $80,000
= $220,000
o Entity theory (orthodox view)
Net Income = Revenue Operating expense
= $1,000,000 - $700,000
= $300,000
Net Income in this theory also equals the operating margin.
o Entity theory (unorthodox view)
Net Income = Operating margin (Interest expense + Dividends preferred stock + Dividends common stock)
= $300,000 ($80,000 + $30,000 + $100,000)
= $300,000 - $210,000
= $90,000
o Residual theory
Net Income = Operating margin (Interest expense + Dividends preferred stock)
= $300,000 ($80,000 + $30,000)
= $300,000 - $110,000
= $190,000
2. Would any of your......
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