In Calculating Diluted Earnings Per Share, the Equivalent Number of Convertible

question 31

Multiple Choice

In calculating diluted earnings per share, the equivalent number of convertible preferred shares is added as an adjustment to the denominator. If the preferred shares are cumulative, which amount should then be added as an adjustment to the numerator?

• A) annual preferred dividend
• B) annual preferred dividend times (one minus the income tax rate)
• C) annual preferred dividend times the income tax rate
• D) annual preferred dividend divided by the income tax rate

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