In the financial statements, dividends in arrears on cumulative preferred stock should be
A)disclosed in the footnotes
B)classified as an offset to retained earnings
C)classified as a liability
D)classified as an offset to net income

Question

Quizplus · Accepted Answer

Dividends in arrears on cumulative preferred stock are not recognized as a liability until they are declared by the company's board of directors. Instead, they are disclosed in the footnotes of the financial statements to inform users about the potential obligation.

In the Financial Statements, Dividends in Arrears on Cumulative Preferred