Last year, TUV had 40,000 $15 par, 7 percent, cumulative, convertible preferred shares outstanding.The Board of Directors did not declare a dividend for the current period because all of these shares were converted to common shares on the first day of the period.What is the effect on the numerator of the EPS calculation for this year due to the preferred shares? (Tax rate is 40%).

Question

Quizplus · Accepted Answer

Since the preferred shares were converted to common shares at the beginning of the period, there are no preferred dividends to subtract from net income in the EPS calculation for this year.

Last Year, TUV Had 40,000 $15 Par, 7 Percent, Cumulative