Which of the Following Is/are True Regarding the Classification of Redeemable

question 157

Multiple Choice

Which of the following is/are true regarding the classification of redeemable preferred shares on the balance sheet?

• A)The classification of redeemable preferred shares on the balance sheet depends on the conditions for redemption.
• B)If only the issuing firm has the option to redeem, then the preferred shares are part of its shareholders' equity.
• C)If the issuing firm must redeem the preferred shares (so-called "mandatory redemption"), either at a specified time or upon a specified condition certain to occur, the issuing firm treats the preferred shares as a liability.
• D)If the preferred shareholders have the option to require redemption, then the preferred shares appear between liabilities and shareholders' equity under U.S.GAAP and as a liability under IFRS.
• E)all of the above

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Definitions:

Monopoly Profits

Monopoly profits refer to the extra earnings a firm accrues by being the sole supplier of a good or service with no close substitutes, allowing it to dictate market prices.

Industry

A group of manufacturers or businesses that produce a particular kind of goods or services.

Barriers to Entry

Factors that prevent or hinder companies from entering a particular market or industry.

Gas Station

A commercial outlet that offers gasoline and motor oil for automobiles.