Dividends in arrears on cumulative preferred stock
A) are considered to be a non-current liability.
B) are considered to be a current liability.
C) only occur when preferred dividends have been declared.
D) should be disclosed in the notes to the financial statements.

Question

Quizplus · Accepted Answer

Dividends in arrears on cumulative preferred stock are not recognized as liabilities until they are declared. However, they should be disclosed in the notes to the financial statements to inform users about the potential obligation and its impact on future cash flows.

Dividends in Arrears on Cumulative Preferred Stock