When computing earnings per share, cumulative preferred dividends not declared should be:
A)Deducted from earnings for the year.
B)Deducted, net of tax effect, from earnings for the year.
C)Added to earnings for the year.
D)Ignored.

Question

Quizplus · Accepted Answer

Cumulative preferred dividends, whether declared or not, should be deducted from earnings when calculating earnings per share, as they represent an obligation to preferred shareholders.

When Computing Earnings Per Share, Cumulative Preferred Dividends Not Declared