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20 Mar 2019
Assume the client has preferred stock that includes a maturitydate at which time the entity is obliged to reacquire the preferredstock. The client has classified the preferred stock as equity andthe related annual distributions to stockholders as dividendsdeclared. Select the item that best describes how the auditor willdeal with this preferred stock.
A. The classification is correct as it is.
B. The preferred stock dividends should be reclassified asinterest expense.
C. The preferred stock should be reclassified to debt and thepreferred stock dividends should be reclassified as interestexpense.
D. Assure that the preferred stock appears first in priority inthe paid in capital section of stockholdersâ equity.
Assume the client has preferred stock that includes a maturitydate at which time the entity is obliged to reacquire the preferredstock. The client has classified the preferred stock as equity andthe related annual distributions to stockholders as dividendsdeclared. Select the item that best describes how the auditor willdeal with this preferred stock.
A. The classification is correct as it is.
B. The preferred stock dividends should be reclassified asinterest expense.
C. The preferred stock should be reclassified to debt and thepreferred stock dividends should be reclassified as interestexpense.
D. Assure that the preferred stock appears first in priority inthe paid in capital section of stockholdersâ equity.
Hubert KochLv2
22 Mar 2019
