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Elf Company is a successful producer of electronic parts. The company has 2 million 10%,...

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Accounting

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Elf Company is a successful producer of electronic parts. The company has 2 million 10%, cumulative preferred shares outstanding. Elf is obligated to redeem the shares for cash in 10 years. Since the time these shares were issued, management has reported the cumulative preferred shares as shareholders' equity on the balance sheet. Which of the following statements regarding the company's accounting policy is correct? The policy is inappropriate because a mandatorily redeemable financial instrument must be reported as a liability, not as equity. a The policy is appropriate because the shares are cumulative. The policy is inappropriate because from the perspective of the common shareholders, preferred stock has many of the same features as debt. The policy is appropriate because preferred shares must be reported as equity, together with common stock

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