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 is true concerning dividends?

Dividends paid reduce a company's net income on the income statement.

Dividends are classified as an expense on the balance sheet.

Preferred shareholders are typically paid dividends before common shareholders.

Dividends are always required to be paid by corporations each year.

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Verified step by step guidance

Understand the concept of dividends: Dividends are distributions of a company's earnings to its shareholders, typically in the form of cash or additional shares. They are not considered expenses and do not appear on the income statement as they do not reduce net income.

Clarify the classification of dividends: Dividends are not classified as expenses on the balance sheet. Instead, they are recorded as a reduction in retained earnings within the equity section of the balance sheet.

Examine the payment hierarchy: Preferred shareholders are typically paid dividends before common shareholders. This is because preferred shares often have a fixed dividend rate and priority in payment over common shares.

Understand the obligation to pay dividends: Corporations are not required to pay dividends each year. Dividend payments are at the discretion of the company's board of directors and depend on factors such as profitability, cash flow, and strategic goals.

Summarize the correct statement: Based on the analysis, the correct statement is that preferred shareholders are typically paid dividends before common shareholders. This reflects the priority structure in dividend payments.