Dividends on cumulative preferred stock do not become a liability of the corporation until they are declared by the board of directors.

Question

Quizplus · Accepted Answer

Dividends on cumulative preferred stock are not considered as a liability until they are declared by the board of directors. This means that the corporation is not obligated to pay dividends to holders of cumulative preferred stock until they are declared, and the unpaid dividends can accumulate and become a liability over time.

Dividends on Cumulative Preferred Stock Do Not Become a Liability