Which of the following statements is true with regard to 7% cumulative, participating preferred stock?

Question

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a. Stockholders who hold this type of stock are not guaranteed a dividend each year in the sense that if the company does not have sufficient earnings or decides not to declare dividends, the preferred dividends will not be paid. However, because the stock is cumulative, any missed dividends will accumulate and must be paid in the future before any dividends can be paid to common shareholders.
b. The issue price of this stock is indeed reported in the preferred stock account on the balance sheet, but this statement does not specifically pertain to the characteristics of 7% cumulative, participating preferred stock. It is a general accounting treatment for all preferred stock.
c. This statement is true. Participating preferred stock not only receives its fixed dividend rate (in this case, 7% of the par value) but also participates in additional earnings distributions along with common stockholders once the preferred dividend has been paid and if the company decides to distribute more than the fixed rate.
d. While it is true that dividends on cumulative preferred stock accumulate if not declared, they do not create a formal liability on the balance sheet. Instead, the amount in arrears is disclosed in the notes to the financial statements. The company is obligated to pay these accumulated dividends before any dividends can be paid to common shareholders, but it is not a liability in the traditional sense because the obligation to pay does not arise until a dividend is declared by the board of directors.

Which of the Following Statements Is True with Regard to 7