The Financial Statements of a Corporation That Failed During the Current

question 107

Multiple Choice

The financial statements of a corporation that failed during the current year to pay any dividends on its cumulative preference share should:

• A) Include the amount of the omitted dividends among its current liabilities.
• B) Include a footnote disclosing the amount of the dividends in arrears.
• C) Show the amount of the omitted dividends as a deduction from retained earnings.
• D) List the omitted dividends as a long-term liability.

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Definitions:

Effective Rate

The actual interest rate of an investment or loan when compounding interest is taken into account, differing from the nominal rate by including the effects of compounding.

Financial Position

A snapshot of the resources, obligations, and the net worth of an individual or organization at a specific point in time.

Nominal Rate

The stated interest rate of a loan or investment, not taking into account the effect of compounding.

Semiannually

Referring to an occurrence or event happening twice a year.