XYZ declared and paid $10,000 in dividends in January of the current year to its

Question

XYZ declared and paid $10,000 in dividends in January of the current year to its preferred shareholders. The preferred stock is convertible and noncumulative. The dividend: Select one: A. Will be added to the denominator of the basic earnings per share for the current year. B. Will be subtracted from the numerator of the diluted earnings per share for the current year. C. May not affect earnings per share depending on the declaration date. D. Will be added back to the numerator of the diluted earnings per share for the current year.

Explanation / Answer

When preferred stock is convertible and non cumulative then dividend will be added back to the numerator of the diluted earnings per share for the current year.

so answer is d) will be added back to the numerator of the diluted earnings per share for the current year.

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