Undeclared dividends are deducted from net income in the earnings per share computation for which type of preference shares?
A) Non-cumulative only.
B) Cumulative only.
C) Neither non-cumulative nor cumulative.
D) Both non-cumulative and cumulative.

Question

Quizplus · Accepted Answer

Undeclared dividends are deducted from net income in the earnings per share computation for cumulative preference shares, as they accumulate and must be paid before any dividends can be paid to common shareholders. Non-cumulative preference shares do not have this requirement, as any missed dividends do not accumulate and are not required to be paid at a later time. Therefore, undeclared dividends are not deducted from net income for non-cumulative preference shares.

Undeclared Dividends Are Deducted from Net Income in the Earnings