How should cumulative preferred dividends in arrears be shown in a corporation's statement of financial position?

a. Note disclosure

b. Increase in stockholders' equity

c. Increase in current liabilities

d. Increase in current liabilities for the amount expected to be declared within the year or

operating cycle, and increase in long-term liabilities for the balance

Question

Mackenzie Vaughan

Business

2 October, 22:17

How should cumulative preferred dividends in arrears be shown in a corporation's statement of financial position?

a. Note disclosure

b. Increase in stockholders' equity

c. Increase in current liabilities

d. Increase in current liabilities for the amount expected to be declared within the year or

operating cycle, and increase in long-term liabilities for the balance

+4

Answers (1)

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Deangelo Gonzales · Answer 1

Answer: Option A

Explanation: The unpaid dividends on cumulative preferred stock are recorded on the notes of the financial statements. These dividends are generally omitted and are not declared by the organisation liable to pay them. Hence they are not recorded on the balance sheet and are shown as footnotes.

From the above we can conclude that the correct option is A.