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

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Multiple Choice

Unpaid dividends on cumulative preferred stock are referred to as dividends in:

default

reserve

arrears

advance

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Verified step by step guidance

Understand the concept of cumulative preferred stock: Cumulative preferred stock is a type of preferred stock where dividends accumulate if they are not paid in a given period. These unpaid dividends must be paid before any dividends can be distributed to common shareholders.

Learn the term 'dividends in arrears': Dividends in arrears refer to the unpaid dividends on cumulative preferred stock. These are obligations that the company owes to preferred shareholders but has not yet paid.

Differentiate between the terms provided in the problem: 'Default' refers to a failure to meet financial obligations, 'reserve' refers to funds set aside for specific purposes, and 'advance' refers to payments made ahead of time. None of these terms accurately describe unpaid dividends on cumulative preferred stock.

Recognize that 'arrears' is the correct term: The term 'arrears' specifically applies to unpaid obligations, such as dividends on cumulative preferred stock, that are due but not yet paid.

Apply this understanding to similar problems: Whenever you encounter unpaid dividends on cumulative preferred stock, remember that they are referred to as 'dividends in arrears' and must be disclosed in the financial statements of the company.