All dividends in arrears on cumulative preferred stock are included in the equity allocated to preferred stockholders.

Question

Quizplus · Accepted Answer

Cumulative preferred stock is entitled to receive all past unpaid dividends before any dividends can be paid to common stockholders. This means that any dividends in arrears (unpaid dividends) must be accounted for and included in the equity allocated to preferred stockholders. Therefore, all dividends in arrears on cumulative preferred stock are included in the equity allocated to preferred stockholders.

All Dividends in Arrears on Cumulative Preferred Stock Are Included