1. Which of the following statements pertaining to preferred shares is correct?

   		If the preferred shares are non-cumulative, the current year's net income would be allocated to the preferred shares whether or not preferred dividends are declared.
   		If the preferred shares are non-cumulative, only the current year's net income would be allocated to preferred shares if preferred dividends are declared, since dividends are never in arrears with non-cumulative preferred shares.
   		If the preferred shares are cumulative, the current year's net income would be allocated to the shares, only if dividends are declared in the year.
   		There can never be any dividends in arrears when preferred shares are cumulative.