In computing the earnings per share of common stock, noncumulative preferred dividends not declared should be
A) deducted from the net income for the year.
B) added to the net income for the year.
C) ignored.
D) deducted from the net income for the year, net of tax.

Question

Quizplus · Accepted Answer

Noncumulative preferred dividends not declared are not considered as an expense and therefore should be ignored in computing the earnings per share of common stock. These dividends are not owed to the preferred shareholders and do not affect the earnings available to the common shareholders.

In Computing the Earnings Per Share of Common Stock, Noncumulative