Under U$.$S$.$ GAAP, if an entity issues $4$ percent preferred stock that gives shareholders the right to redeem the shares if the prevailing interest rates on $5-$year certificates of deposit exceed $4$ percent, how should this stock be accounted for on the books of the entity?

Question $52$ options:

a$)$

Initially as equity and then reclassified as a liability when the triggering event occurs

b$)$

As a liability since the chances are more likely than not that the triggering event will occur

c$)$

As equity or a liability at the option of the entity

d$)$

As a permanent part of equity, to be debited as shares are redeemed