Which of the following statements concerning cumulative preferred stock is correct?
　　A. Upon the declaration of a cash dividend on the preferred stock, preferred shareholders become unsecured creditors of the corporation.
　　B. Upon the dissolution of a corporation the preferred shareholders have priority over unsecured judgment creditors.
　　C. If dividends are not declared for any year, they become debts of the corporation for subsequent years.
　　D. Preferred stock represents a type of debt security similar to corporate debentures.
　　Answer:A
　　A is corrent because upon declaration, a cash dividend on preferred stock becomes a legal debt of the corporation, and the preferred shareholders become unsecured creditors of the corporation.
　　B is incorrect because upon the dissolution of a corporation, the preferred shareholders do not have priority over unsecured creditors. Only after all debts owing to creditors are satisfied will the remaining corporate assets be distributed among the shareholders. Preferred shareholders will have priority over common shareholders.
　　C is incorrect because unpaid dividends in cumulative stock are not a liability of the corporation until they are declared. However, any cumulative preferred stock dividends not paid in any year must be made up before any future distributions can be made to common shareholders.
　　D is incorrect because although preferred stock does assume many characteristics of a debt security, preferred stock represents a type of ownership security and is not similar to corporate debentures which are unsecured debt securities with no such ownership rights.