Hi, I would appreciate any impots on the following problem. This problem was listed in the Shweser book after the last chapter in FSA which deals with Balance Sheet adjustments. The following Balance sheet was provided (figures represent thousands). Assets Cash \$5,000 Marketable Securities \$3,000 Accounts Receivable \$20,000 Inventories \$10,000 Deffered Taxes \$5,000 Total Current Assets \$43,000 Net PP & E \$80,000 Prepaid Pension Cost \$6,000 Intangible Asset \$12,000 Total Asset \$141,000 Liabilities and Owner`s Equity Accounts Payable \$18,000 Notes Payable \$7,000 Total Current Liabilities \$25,000 Long Term Debt \$24,000 Deffered Taxes \$8,000 Preferred Stock (200 000 shares) \$10,000 Common Stock (2 million shares) \$40,000 Retained Earnings \$34,000 Total Stockholder`s Equity \$84,000 Total Liabilities and Equity \$141,000 Footnotes: The current market price of the preffered stock is 40 per share. Answer provided in the Shweser book: The preffered stock valuation is reduced to 8000 = 40\*200. (I understood this part). The offset is a 2 000 increase to equity. (why do we have to increase the equity, when we just reduced it.) The prupose of the excrcise was to calcualte the ratio of long term debt to common and preffered equitybased on the adjusted balance sheet. Thanks for the help!