EXERCISES For each of the following pieces of information, state whether it shou

Question

EXERCISES For each of the following pieces of information, state whether it should be included in, or excluded from, the Facts section of an issues memo, assuming that the objective of the issues memo is to evalate whether a new issue of preferred stock should be classified as a liability or as equity. Briefly explain your reasoning. 1. a. The fact that the issuer is a public company b. The key terms of the preferred stock, including its par value and any conversion or redemption features. c. The anticipated size of the issuance, in dollars. d. The date on which the issuance is expected to occur. e. Background on the company and its primary sources of revenue. f The fact that the company entered into a similar transaction several years ago. g. Detail about the counterparty (investor) who is expected to purchase a large share of the preferred stock ssuance

Explanation / Answer

A) to be included as the background about the issuer is required.

B)Key terms to be included to decide whether preferred stock is an asset or a liability.

C) Anticipated size to be included to decide upon any threshold for classification.

D)Date of expected issue to be included to decide upon the accounting year of classifucation.

E) Background of the company and its source of revenue to be excluded.

F) Fact about similar transaction to be excluded.

G) Details of the major investor to be excluded.

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