A Company Has Cumulative Preferred Stock

question 224

Multiple Choice

A company has cumulative preferred stock. When computing earnings per share, the current year's dividends not declared on the preferred stock 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.

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Definitions:

Stop Payment

An order given by an account holder to their bank to not pay a specific check that has been issued or to halt a payment that has been requested.

Heirs

Individuals legally entitled to receive a portion of a deceased person's estate under the laws of inheritance.

Deceased

A term used to describe a person who has died.

Stop-Payment Order

A request made to a bank to cancel a cheque that has not been processed yet.