In calculating basic earnings per share, if the preferred shares are cumulative, the amount that should be deducted as an adjustment to the numerator is the

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In calculating basic earnings per share (EPS), if the preferred shares are cumulative, the annual preferred dividend should be deducted from the earnings available to common shareholders. This is because cumulative preferred dividends must be paid before any dividends can be paid to common shareholders, regardless of whether the dividends were actually declared in the year. The adjustment ensures that the EPS calculation reflects the earnings available to common shareholders after fulfilling the obligation to preferred shareholders. Options B, C, and D involve adjustments that are not relevant for the basic EPS calculation as described.

In Calculating Basic Earnings Per Share, If the Preferred Shares