Financial Accounting

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Common Stock vs. Debt Features


Compare and contrast dividends on common stock with interest on bonds. Which of these statements are correct about differences between dividends and bond interest?

Select ALL that apply.

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Dividends are declared and paid at the discretion of the board of directors. Interest on bonds accrues until paid. Dividends on common stock accrue until paid. Dividends declared reduces income taxes payable. Dividends declared reduces profits for the period.