Preferred dividends would not be subtracted from earnings when computing basic earnings per share in a year when the dividends are not declared if the preferred stock is:
A) Noncumulative.
B) Convertible.
C) Participating.
D) Cumulative.

Question

Quizplus · Accepted Answer

Preferred dividends are subtracted from earnings when computing basic earnings per share only in years when the dividends are declared. If the preferred stock is noncumulative, any dividends not declared in a given year cannot be carried forward to future years. Therefore, they would not affect the calculation of basic earnings per share.

Preferred Dividends Would Not Be Subtracted from Earnings When Computing