In determining diluted earnings per share, dividends on nonconvertible cumulative preferred stock should be

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Diluted earnings per share calculations require that dividends on nonconvertible cumulative preferred stock be deducted from net income regardless of whether they have been declared. This is because these dividends are considered a fixed obligation that must be met before earnings can be distributed to common shareholders.

In Determining Diluted Earnings Per Share, Dividends on Nonconvertible Cumulative