In Computing Earnings Per Share, the Equivalent Number of Shares

Multiple Choice

In computing earnings per share, the equivalent number of shares of convertible preferred stock are added as an adjustment to the denominator (number of shares outstanding) . If the preferred stock is cumulative, which amount should then be added as an adjustment to the numerator (net earnings) ?

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