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

Dividends payable to a policy owner are best described as:

A distribution of surplus earnings to the policyholder

A mandatory interest payment on the policy's cash value

A return of premium that is taxable as income

A liability that must be repaid by the policy owner

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Verified step by step guidance

Understand the concept of dividends payable: In financial accounting, dividends payable refer to amounts declared by a company to be distributed to shareholders or policyholders. For insurance policies, dividends are typically a distribution of surplus earnings.

Analyze the options provided: Carefully read each option and determine which aligns with the definition of dividends payable. For example, consider whether dividends are mandatory payments, taxable returns, or liabilities.

Clarify the nature of surplus earnings: Surplus earnings are the excess funds generated by an entity after covering all expenses and obligations. These are often distributed to stakeholders, such as policyholders, as a reward for their participation.

Evaluate the correct answer: Based on the definition and characteristics of dividends payable, identify the option that correctly describes them as a distribution of surplus earnings to the policyholder.

Confirm the reasoning: Ensure that the selected answer aligns with the principles of financial accounting and the context of insurance policies, where dividends are typically non-taxable and not mandatory payments or liabilities.