### Cumulative Preferred Stock and Dividend Rights#### True or False**Statement:** Cumulative preferred stock gives its owners a right to be paid both the current and all prior periods' unpaid dividends before any dividends are paid to common stockholders.- [True]- [False]---**Explanation:** Cumulative preferred stock contains a feature that requires the issuing company to pay all dividends, including those that were omitted in the past, to preferred shareholders before making any dividend payments to common shareholders. This ensures that preferred shareholders receive their expected dividends, even if the company faces financial difficulties or cash flow issues in specific periods. Use this statement as a knowledge check or quiz question to test your understanding of the rights associated with cumulative preferred stock in corporate finance.**Interactive Component:** Select "True" or "False" to confirm your understanding of the statement above.

Introduction: Cumulative preferred stock is one sort of preferred stock; a preferred stock normally…

Answered: Cumulative preferred stock gives its…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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If a preferred stock is of the cumulative type, a. dividends cannot be passed if they are earned. b. unpaid dividends of one period must be carried forward and paid in subsequent periods before anything can be paid to common stockholders. c. dividends must be paid, and if not a liability is created. d.dividends must be paid on an equal basis with common stock, so long as earnings permit.
The journal entry to record a stock dividend causes the Common Stock account to increase. True False
Cumulative preferred stock O requires dividends in arrears to be paid before the firm can pay dividends on common. O has a right to vote cumulatively. O has a claim to dividends before bonds. Ohas a higher required return than common stock.
Preferred stock is a special form of stock having a fixed periodic dividend that must be paid prior to payment of any interest to outstanding bonds. Is this true or false?
Which of the following statements regarding preferred stock is true? a.Dividends are guaranteed to preferred stockholders. b.Preferred stockholders have a lower chance of receiving dividends than common stockholders do. c.When only one class of stock is issued, it is called preferred stock. d.Cumulative preferred stock has a right to receive regular dividends that were not declared (paid) in prior years.
Mandatory redeemable preferred stock must be classed as Stockholders' Equity on the balance sheet, according to FASB guidelines. False or True.
Treasury stock is: Canceled as soon as it is acquired. O A current asset. O Included in issued shares. Stock owned by the Treasurer of the company.
hich of the following is not true about the stockholders' equity section of a balance sheet? a. Stock characteristics are indicated. b. Preferred stock subscriptions receivable, common stock subscriptions receivable, and treasury stock are subtracted from the total of paid - in capital and retained earnings. c. Contra equity accounts are shown at the beginning of the stockholders' equity section of a balance sheet. d. Retained earnings is listed after all paid - in capital.
Common stock shares issued will exceed common stock shares outstanding as a result of the O payment in full of subscribed stock. O declaration of a stock split. O purchase of treasury stock. O declaration of a stock dividend.
When a corporation has outstanding both common and preferred stock Select one: a. Earnings per share is computed without regard to the amount of dividends declared on common stock. b. Basic and diluted earnings per share are reported only if the preferred stock is cumulative c. Earnings per share is reported for each type of stock outstanding d. Earnings per share is computed without regard to the amount of the annual preferred dividends.
Which of the following is a current liability? a. Preferred dividends in arrears. b. A dividend payable in the form of additional shares of stock. c. A cash dividend payable to preferred stockholders. d. All of these answers are correct.

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Cumulative preferred stock gives its owners a right to be paid both the current and all prior periods' unpaid dividends befor paid to common stockholders. True or False True False