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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Definitions:

Chain Argument

A form of argument that consists of a series of reasons leading to a conclusion, where each step is supported by the previous one.

Modus Ponens

A theoretical reasoning method where the initial statement is confirmed by the subsequent statement.

Inductive Argument

A method of logic where the arguments aim to provide substantial support for the conclusion's truth, rather than conclusive proof.

Valid Deductive Argument

A logical argument where, if the premises are true, the conclusion must also be true.