Accounting Seminar – 6

Participating preferred stock

Callable preferred stock

Cumulative preferred stock

Convertible preferred stock

Noncumulative preferred stock

A dividend preference for preferred stock means that:

1. 
   Preferred stockholders are allocated their dividends before dividends are allocated to common shareholders
   

2. 
   Preferred shareholders are guaranteed dividends
   
3. 
   Dividends are paid quarterly
   
4. 
   Preferred stockholders prefer dividends more than common stockholders
   
5. 
   Dividends must be declared on preferred stock
   
24. 
    A company issued 7% preferred stock with a $100 par value. This means that:
    
    1. 
       Preferred shareholders have a guaranteed dividend
       
    2. 
       The amount of the potential dividend is $7 per year per preferred share
       
    3. 
       Preferred shareholders are entitled to 7% of the annual income
       
    4. 
       The market price per share will approximate $100 per share
       
    5. 
       Only 7% of the total contributed capital can be preferred stock
       
25. 
    Retained earnings:
    

1. 
   Generally consists of a company's cumulative net income less any net losses and dividends declared since its inception
   

2. 
   Can only be appropriated by setting aside a cash fund
   
3. 
   Represent an amount of cash available to pay shareholders
   
4. 
   Are never adjusted for anything other than net income or dividends
   
5. 
   All of the above
   
24. 
    Prior period adjustments to financial statements can result from:
    
    1. 
       Changes in estimates
       
    2. 
       Using unacceptable accounting principles
       

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9. 
   
   C. Discontinued operations D. Changes in tax law
   
   E. Extraordinary items
   
   

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