Lexicon, Inc.

1. When computing earnings per share on common stock, dividends on cumulative, nonconvertible preferred stock should be:
A. deducted from net income only if the dividends were declared or paid in the current period.
B. deducted from net income regardless of the whether the dividends were not paid or declared in the period.
C. deducted from net income only if net income is greater than the dividends.
D. ignored.

2. Lexicon, Inc. bought a patent for $600,000 on January 2, 1997, at which time the patent had an estimated useful life of 10 years. On February 2, 2000, it was determined that the patent?s useful life would expire at the end of 2003. How much would Lexicon record as amortization expense for this patent for the year ending December 31, 2001?
A. $140,000
B. $120,000
C. $105,000
D. $60,000