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

Which of the following statements about dividends is true?

Dividends are recorded as an expense on the income statement.

Dividends are always paid in the form of additional shares of stock.

Dividends must be paid to common shareholders before preferred shareholders.

Dividends are distributions of a corporation's earnings to its shareholders.

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Verified step by step guidance

Understand the concept of dividends: Dividends are distributions of a corporation's earnings to its shareholders, typically as a reward for their investment in the company.

Clarify the accounting treatment: Dividends are not recorded as an expense on the income statement. Instead, they are recorded as a reduction in retained earnings on the balance sheet.

Recognize the forms of dividends: Dividends can be paid in various forms, such as cash, additional shares of stock (stock dividends), or other assets. However, they are not always paid in the form of additional shares of stock.

Understand the priority of payment: Preferred shareholders typically have priority over common shareholders when it comes to receiving dividends. Dividends must be paid to preferred shareholders first if the company has issued preferred stock.

Conclude with the correct statement: Dividends are distributions of a corporation's earnings to its shareholders, which is the accurate description among the options provided.