Ute Co. had the following capital structure during 19X3 and 19X4:

Preferred stock, $10 par, 4% cumulative, 25,000 shares issued and outstanding $ 250,000

Common stock, $5 par, 200,000 shares issued and outstanding 1,000,000

Ute reported net income of $500,000 for the year ended December 31, 19X4. Ute paid no preferred dividends during 19X3 and paid $16,000 in preferred dividends during 19X4. In its December 31, 19X4, income statement, what amount should Ute report as basic earnings per share?

Ans: 2.45

(500,000 - 10,000)/200,000

My Q is why 16k was not subtracted even though those were the dividends paid on PS.

Thanks.