Which of the Following Securities Must Be Reported as a Liability

question 1

Multiple Choice

Which of the following securities must be reported as a liability because they have the characteristics of both liabilities and equity, but the liability characteristic is dominant?

• A) Redeemable preferred stock.
• B) Stock options issued with a debt security.
• C) Detachable stock options.
• D) Mandatorily redeemable preferred stock.

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Definitions:

Subsidiary Profits

Earnings generated by a subsidiary that contribute to the income and financial standing of its parent company.

Fair Value

Refers to the estimated price at which an asset or liability could be exchanged between knowledgeable, willing parties in an arm's length transaction.

Issued Capital

The total value of a company's shares that have been sold to shareholders.

Tax Rate

is the percentage at which an individual or corporation is taxed by the government.