Question

Stockit Inc. has 1,000 shares of 5%, $100 par value, cumulative preferred stock outstanding. In its first two years of business, Stockit did not declare a dividend. As a result, Stockit's balance sheets at the end of its first two years of business should:

Answer 1

Answer:

The balance sheet should include no dividends payable

Explanation:

Looking at the scenario described , as Stockit did not declare a dividend in the two years of operation , this mean that  dividends payable will not appear of the balance sheet.

Dividends payable is the amount of after tax profit that a company has authorized for distribution to shareholders as dividends . but not yet paid out in cash.This is recorded as liability on the company's balanced sheet after declaration and before payment. But on payment , it no longer appear on the balanced sheet.

In a situation where dividends are not declared by the company for whatever reason , it does not appear on the balance sheet