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I cannot understand the logic here. Becker gives the following situation:
A company has convertible preferred dividends and convertible debt.
These items are assumed to be converted at the beginning of the year.
When calculating income available to common shareholders, the debt interest is added back to net income, but the preferred dividends are ignored.
I don't understand how this is possible. If the convertible debt interest was accrued during the year, then surely the dividends were also paid during the year. Therefore, both amounts should be added back to net income. What am I missing?
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