How should cumulative preferred dividends in arrears be shown in a corporation's statement of financial position?
A) Note disclosure
B) Increase in stockholders' equity
C) Increase in current liabilities
D) Increase in current liabilities for the amount expected to be declared within the year or operating cycle, and increase in long-term liabilities for the balance

Question

Quizplus · Accepted Answer

Cumulative preferred dividends in arrears are not recognized as a liability until they are declared by the board of directors. Instead, they are disclosed in the notes to the financial statements to inform users about the potential obligation.

How Should Cumulative Preferred Dividends in Arrears Be Shown in a Corporation's