Question

Dividends in arrears are dividends on A. cumulative preferred stock that have been declared but have not been paid. B. non-cumulative preferred stock that have not been declared for a given period of time. C. cumulative preferred stock that have not been declared for a given period of time. D. common dividends that have been declared but have not yet been paid.

Answer 1

Answer:

The correct answer is letter "A": cumulative preferred stock that have been declared but have not been paid.

Explanation:

Dividends in arrears are dividends that have not been paid in a period on cumulative preferred stock. A company does not necessarily have to pay dividends to its shareholders but the payment becomes cumulative. Under this situation, it is said that the organization has failed to generate enough cash during the year. Besides, there must be a dividend declaration for the dividends in arrears to be liable recognized.