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 all preferred shares were converted to common shares before the current period, there were no preferred dividends to be paid or accrued in the current period. Therefore, the effect on the numerator of the EPS calculation is $0.

Last Year,TUV Had 40,000 $15 Par,7 Percent,cumulative,convertible Preferred Shares Outstanding