If Preferred Shares Are Noncumulative, Then

question 36

Multiple Choice

If preferred shares are noncumulative, then:

• A)Cash dividends not declared in prior years are lost permanently.
• B)The preferred shareholders are entitled to current and arrears of dividends before common shareholders can receive dividends.
• C)Prior years' cash dividends must be paid to the preferred shareholders before any dividends may be paid to the common shareholders.
• D)The preferred shareholders are only entitled to a specific percent of the cash dividends, regardless of the amount declared.

Learn the implications of declaring dividends on company liability and equity.

Comprehend the role of the board of directors in declaring dividends and the differentiation between cash and stock dividends.

Understand the accounting treatment for declaring and distributing stock dividends.

Differentiate between common stock, preferred stock, treasury stock, and their characteristics.

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