Dividends in arrears are not a liability until the board of directors declares the dividends, nor are they an expense. They are disclosed in a footnote.

Dividends in arrears are not a liability until the board of directors declares the dividends, nor are they an expense. They are disclosed in a footnote.

How are dividends in arrears reported in the financial statements?

In a footnote

As an equity item

As a liability

	As an expense
	This statement is false. A cumulative dividend feature means that preferred stockholders must be paid current-year dividends and any unpaid prior-year dividends before common stockholders receive dividends.

A cumulative dividend feature means that preferred stockholders must be paid only current-year dividends before common stockholders receive dividends.

True

	False
The capital stock section of the balance sheet consists of preferred and common stock. Any stock accounts that are in excess of the par or stated value are included in the additional paid-in capital section.

Which one of the following is not part of ‘capital stock’ in the balance sheet?

Paid-in capital in excess of par value-common stock

Convertible Class A preferred stock, stated value

Non-voting Class B preferred stock, stated value

Common stock, stated value