Which of the Following Statements Is True When Dividends Are

question 98

Multiple Choice

Which of the following statements is true when dividends are not declared or paid on cumulative preferred stock?

• A) The shareholders must be allowed to convert their shares to common stock.
• B) The unpaid dividends are accrued as a liability.
• C) The unpaid dividends are reported in a note to the financial statements.
• D) The unpaid dividends accrue interest until paid.

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Definitions:

Long-Term Debt

Debt obligations that are due more than one year into the future, often used to finance or expand operations.

Operating Cycle

The time it takes for a business to purchase or produce inventory, sell the product, and collect cash from the sale.

Post-Closing Trial Balance

A list of all accounts and their balances after closing entries have been made, used to check the equality of debits and credits and prepare for the next accounting period.

Owner's Equity Statement Accounts

Reports detailing changes in the owner's equity account for a period, showing contributions, withdrawals, and the period's profit or loss.