An excerpt from the statement of financial position of Earl Limited follows:

Notes and Assumptions
December 31, 2014
1. Options were granted/written in 2013 that give the holder the right to purchase 50,000 common shares at $12 per share. The average market price of the company's common shares during 2014 was $18 per share. The options expire in 2022 and no options were exercised in 2014.
2. The 4% bonds were issued in 2013 at face value. The 6% convertible bonds were issued on July 1, 2014, at face value. Each convertible bond is convertible into 80 common shares (each bond has a face value of $1,000).
3. The convertible preferred shares were issued at the beginning of 2014. Each share of preferred is convertible into one common share.
4. The average income tax rate is 31%.
5. The common shares were outstanding during the entire year.
6. Preferred dividends were not declared in 2014.
7. Net income was $1,750,000 in 2014.
8. No bonds or preferred shares were converted during 2014.
Instructions
(a) Calculate basic earnings per share for 2014.
(b) Calculate diluted earnings per share for 2014. For simplicity, ignore the requirement to record the debt and equity components of the bonds separately.
(c) From the perspective of a common shareholder, provide support for the treatment of the preferred dividends in calculating Earl Limited's basic and diluted earnings per share.
(d) Discuss how a potential shareholder's investment decision may be affected if diluted earnings per share was not reported?

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EARL LIMITED Selected Statement of Financial Position Information At December 31, 2014 Long-term debt Notes payable, 10% 4% convertible bonds payable 6% convertible bonds payable $ 2,000,000 3,000,000 4,000,000 $9,000,000 Total long-term debt Shareholders' equity $0.80 cumulative, no par value, convertible preferred shares (unlimited number of shares authorized, 280,000 shares issued and outstanding) $4,000,000 Common shares, no par value (5,000,000 shares authorized, 1,800,000 shares issued and outstanding) 18,000,000 100,000 5,000,000 $27,100,000 Contributed surplus Retained earnings Total shareholders' equity