The shareholders' meeting for Harris Corporation has been in progress for some Lime. The chief financial officer for Harris is presently reviewing the company's financial statements and is explaining the items that comprise the equity section of the statement of financial position for the current year. The equity section of Harris Corporation at December 31, 2011, is shown below.
HARRIS CORPORATION
Statement of Financial Position (partial)
December 31, 2011
Share capital—preference, authorized 1,000,000 shares
cumulative, $100 par value. $8 per share, 6,000
shares issued and outstanding .............. $ 600,000
Share capital—ordinary authorized 5,000,000 shares, $1 par
value. 3.000.000 shares issued, and 2,700,000
outstanding ..................... 3.000,000
Share premium—preference .............. 50,000
Share premium—ordinary ............... 25,000,000
Retained earnings .................. 900,000
Less: Treasury shares (300,000 shares) .......... 9,300,000
Total equity .....................$20,250,000
At the meeting, shareholders have raised a number of questions regarding the equity section.

Instructions
With the class divided into groups, answer the following questions as if you were the chief financial officer for Harris Corporation.
(a) "What does the cumulative provision related to the preference shares mean?"
(b) "I thought the ordinary shares were presently selling at $29.75, but the company has the shares stated at $1 per share. How can that be?"
(c) "Why is the company buying back its ordinary shares? Furthermore, the treasury shares have a debit balance because it is subtracted from equity. Why are treasury shares not reported as an asset if it has a debit balance?"
(d) "Why is it necessary to show share premium? Why not just show shares at the total amount paid in?"