Answered: Dividends in arrears on preference…

Dividends in arrears on preference shares are reported in the financial statements as a (an) a. liability b. reduction from Retained Earnings c. reduction from Retained Earnings d. expense

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter10: Stockholder's Equity

Section: Chapter Questions

Problem 28DQ

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Question

Dividends in arrears on preference shares are reported in the financial statements as a (an)

a. liability
b. reduction from Retained Earnings
c. reduction from Retained Earnings
d. expense

Definition Definition Type of stock which is granted priority over dividend distributions as compared to common stockholders. Preferred stocks also do not carry any voting rights. Notably, in a case where a company is going to be liquidated, preferred stockholders have a priority claim on the value of assets of the company as quoted in the balance sheet, as compared to the common stockholders.

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