Case 15-2 Financial Statements under Various Theories of Equity (Adjusted)
Drake Company reported the following for 2019:
Cost of goods sold
Bonds payable (10%, issued at par)
Preferred stock, $5, $100 par
Common stock, $10 par
Paid-in capital in excess of par
Common stockholders received a $2 dividend during the year. The preferred stock is noncumulative and nonparticipating.
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:
Residual equity theory
Explain the above differences in net income and stockholders equity by the theory.