Which of the following statements is true with regard to 7% cumulative, participating preferred stock?
A. Stockholders who hold this type of stock are guaranteed a dividend each year.
B. The issue price of this stock is reported in the preferred stock account on the balance sheet.
C. If the corporation pays a per share dividend in excess of 7% of the preferred stock's par value and there are no dividends in arrears, the preferred shares will receive a share of the amounts available for distribution as dividends to other classes of stock.
D. If dividends are not declared, they accumulate and a liability must be reported on the balance sheet for any amount in arrears that is owed to the preferred stockholders.
Answer: C
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