When a dividend paid to stockholders who own mandatorily redeemable preferred stock,the company must report the dividend
A)As an adjustment to retained earnings in its statement of owners' equity.
B)As an expense in the income statement.
C)As a reduction to other comprehensive income.
D)In the financing activities section of the statement of cash flows.

Question

Quizplus · Accepted Answer

When a dividend is paid to stockholders who own mandatorily redeemable preferred stock, it is treated as an expense in the income statement, as it represents a cost of financing the company's operations. Therefore, the correct answer is B, "As an expense in the income statement." The other choices are not applicable in this situation, as the dividend is not an adjustment to retained earnings, a reduction to other comprehensive income, or a financing activity.

When a Dividend Paid to Stockholders Who Own Mandatorily Redeemable