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 policyowner are best described as:

A reduction in the face value of the policy

A liability that must be repaid by the policyowner

A distribution of surplus earnings to the policyowner

A mandatory interest payment on the policy

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Verified step by step guidance

Understand the concept of dividends in the context of financial accounting. Dividends represent a distribution of a company's earnings to its shareholders or policyowners, typically as a reward for their investment or participation.

Recognize that dividends payable are classified as a liability on the company's balance sheet until they are distributed. This is because the company has an obligation to pay these amounts to the policyowners or shareholders.

Clarify that dividends payable are not a reduction in the face value of the policy. The face value refers to the principal amount or coverage provided by the policy, which remains unaffected by dividend payments.

Note that dividends payable are not a liability that must be repaid by the policyowner. Instead, they are amounts owed by the company to the policyowner as part of surplus earnings distribution.

Understand that dividends payable are not mandatory interest payments on the policy. They are discretionary and depend on the company's financial performance and surplus earnings.