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 either current or long term.
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 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