In computing earnings per share, the number of shares from convertible preferred stock are added to the denominator. If the preferred stock is cumulative, what amount should then be added to the numerator?

a. Annual preferred dividend b. Annual preferred dividend times (one minus the tax rate)

c. Annual preferred dividend times the tax rate d. Annual preferred dividend divided by the tax rate

14. All of the following would reduce the balance in retained earnings EXCEPT:

a. small stock dividends. b. acquisition of treasury stock.

c. large stock dividends. d. cash dividends.

15. Dilutive convertible securities must be used in the computation of

a. BASIC earnings per share. b. DILUTED earnings per share whether or not converted.

c. BOTH basic and diluted earnings per share. d. DILUTED earnings per share only if converted.

16. Manning Company issued 1,000 shares of its $5 par value common stock having a market value of $72 per share and 200 shares of its $100 par value preferred stock having a market value of $120 per share for a lump sum of $90,000. How much of the proceeds would be allocated to the common stock?

a. $76,000 b. $71,500 c. $18,000 d. $67,500