When a dividend paid to stockholders who own mandatorily redeemable preferred stock, the company must report the dividend
A) As an adjustment to retained earnings in its statement of owners' equity.
B) As interest expense in the income statement.
C) As a reduction to other comprehensive income.
D) In the financing activities section of the statement of cash flows.

Question

Quizplus · Accepted Answer

Mandatorily redeemable preferred stock is treated similarly to debt, and dividends on such stock are considered akin to interest payments. Therefore, they are reported as interest expense in the income statement.

When a Dividend Paid to Stockholders Who Own Mandatorily Redeemable