Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Dividends and Dividend Preferences

Financial Accounting

12. Stockholders' Equity

Dividends and Dividend Preferences

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which of the following best describes 'dividends in arrears' on cumulative preferred stock?

Unpaid dividends on cumulative preferred stock that must be paid before any dividends can be paid to common shareholders.

Dividends that are paid in advance to preferred shareholders.

Dividends that are only paid if the company has sufficient profits in the current year.

Dividends that have been declared but not yet paid to common shareholders.

Previous problemNext problem

Verified step by step guidance

Understand the concept of cumulative preferred stock: Cumulative preferred stock is a type of preferred stock where unpaid dividends accumulate and must be paid before any dividends are distributed to common shareholders.

Define 'dividends in arrears': Dividends in arrears refer to unpaid dividends on cumulative preferred stock from previous periods that have not yet been paid by the company.

Clarify the priority of payment: For cumulative preferred stock, dividends in arrears must be paid first before any dividends can be distributed to common shareholders.

Eliminate incorrect options: Review each option and eliminate those that do not align with the definition of dividends in arrears. For example, dividends paid in advance or those dependent solely on current-year profits are not relevant to this concept.

Select the correct answer: Based on the explanation, the correct description of dividends in arrears is 'Unpaid dividends on cumulative preferred stock that must be paid before any dividends can be paid to common shareholders.'