Which of the following is TRUE of dividends in arrears?

Question

Quizplus · Accepted Answer

Dividends in arrears refer to the accumulated unpaid dividends on cumulative preferred stock. They represent a liability on the balance sheet and must be paid before any dividends can be paid to common stockholders. Option A is incorrect as dividends in arrears are not a liability on the balance sheet. Option B is incorrect as noncumulative preferred stock does not accumulate dividends in arrears. Option D is incorrect as common stock does not have a dividend preference.

Which of the Following Is TRUE of Dividends in Arrears