The following information is provided for Bold Company for the year 2019: • Preferred stock,6%,$50 par value,1,000 shares issued and outstanding
• Common stock,$100 par value,2,000 shares issued and outstanding
• Dividends in arrears for three prior years (2016-2018)
• Total dividends declared and paid in 2019 were $50,000.
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Assuming the preferred stock is noncumulative,what amount of the 2019 dividend declaration for the amount of dividends in arrears was recorded with a credit to the Dividends payable account on the date of declaration?
A)$12,000.
B)$3,000.
C)$0.
D)$50,000.

Question

Quizplus · Accepted Answer

Noncumulative preferred stock means that any missed dividends do not accumulate or carry forward to future periods. Therefore, the dividends in arrears from prior years do not need to be paid and do not affect the current year's dividend declaration. So, no amount was recorded with a credit to the Dividends payable account on the date of declaration.

The Following Information Is Provided for Bold Company for the Year