Question 15 1. Assume that a corporation\'s dividends are two years in arrears f

Question

Question 15
1.
Assume that a corporation's dividends are two years in arrears for its outstanding preferred stock. In the corporation's financial statements, these arrearages are:
Answer

A. Disclosed as a current liability in the balance sheet

B. Disclosed as a long-term liability in the balance sheet

C. Disclosed in the notes to the financial statements

D. Disclosed as a current liability (for the most recent arrearage) and a long-term liability (for the oldest arrearage) in the balance sheet

E. Not disclosed

Explanation / Answer

C. Disclosed in the notes to the financial statements arrears of dividend of cumulative preferred stock is a contingent liability.it is neither a current liability nor long term liability.

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