An unsettled question in accounting for stock is this: Should preferred stock be recognized as a liability, or should it be considered equity? Under International Financial Reporting Standards, preferred stock $($preference shares$)$ often is reported as debt with the dividends reported in the income statement as interest expense. Under U$.$S$.$ GAAP, that is the case only for $$mandatorily redeemable$$ preferred stock.

Two opposing viewpoints are:

View $1$: Preferred stock should be considered equity.

View $2$: Preferred stock should be reported as a liability.

In considering this question, focus on conceptual issues regarding the practicable and theoretically appropriate treatment, unconstrained by GAAP.

Required:

Which view do you favor?Write a memo. Develop a list of arguments in support of your view prior to the class session for which the case is assigned.