Dividends in Arrears on Cumulative Preferred Shares

question 42

Multiple Choice

Dividends in arrears on cumulative preferred shares

• A)are considered to be a non-current liability.
• B)are considered to be a current liability.
• C)only occur when preferred dividends have been declared.
• D)should be disclosed in the notes to the financial statements.

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Definitions:

Preference

In bankruptcy proceedings, the debtor’s favoring of one creditor over others by making payments or transferring property to that creditor at the expense of the rights of other creditors. The bankruptcy trustee is allowed to recover payments made to one creditor in preference over another.

Bankruptcy Proceedings

The legal process through which individuals or entities unable to meet their financial obligations can seek relief from some or all of their debts.

Transferred Property

Property or assets that have been legally moved from one owner to another, through sale, gift, inheritance, or other means of conveyance.

Discharge

The termination of an obligation. In bankruptcy, a discharge terminates the debtor's obligation to pay the debts discharged by the court.