The stockholders’ equity of a corporation may include both preferred stock and common stock. Preferred stock may
(1) Be convertible into common stock, or
(2) Be issued with warrants attached enabling the acquisition of common stock.

Required
Discuss the following three items:
1. The similarities and differences between these types of preferred stock.
2. Theoretically, the appropriate accounting treatment for the proceeds from the issuance of both types of preferred stock.
3. Which accounting treatment is generally acceptable for each type and why?