Which of the following statements pertaining to preferred shares is correct?
A) If the preferred shares are participating, only the current year's Net Income would be allocated to the preferred shares.
B) If the preferred shares are non-cumulative, only the current year's Net Income would be allocated to preferred shares, since dividends are never in arrears with non-cumulative preferred shares.
C) If the preferred shares are participating, the current year's Net Income would be allocated to the shares, only if the subsidiary is fully owned by the parent.
D)There can never be any dividends in arrears when preferred shares are participating.

Question

Quizplus · Accepted Answer

With non-cumulative preferred shares, dividends are not in arrears, and only the current year's Net Income would be allocated to the preferred shares. Participating preferred shares would receive a share in the company's net income, regardless of ownership of the subsidiary. However, dividends in arrears may exist even with participating preferred shares. Therefore, options A, C, and D are incorrect.

Which of the Following Statements Pertaining to Preferred Shares Is