MacDonald Company has reported basic earnings per Class A common share of \(\$ 2.61\). MacDonald has a tax rate of \(40 \%\). The average share price during the year was \(\$ 42\). Review each of the following items:

A. Class B non-voting cumulative \(\$ 1\) shares, 75,000 shares outstanding all year, convertible into Class A shares at the rate of four Class B shares for one Class A share. Dividends of \(\$ 0.50\) were declared this year and basic EPS properly reflects the dividend entitlement of these preferred shares.

B. Class A common stock options outstanding all year for 30,000 shares at a price of \(\$ 65\).

C. Class A common stock options outstanding all year for 30,000 shares at a price of \(\$ 35\).

D. Class A common stock options granted at the end of the fiscal year for 10,000 shares at \(\$ 32\) per share.

E. \(12 \%\), eight-year \(\$ 5,000,000\) convertible bonds outstanding all year, convertible into 18 Class A common shares for every \(\$ 1,000\) bond. A bond discount was recorded when the bond was originally issued and amortization of \(\$ 43,750\) was recorded on the discount this year. On issuance, \(\$ 420,000\) of common stock conversion rights were recorded in shareholders' equity.

F. \(8 \%, 15\)-year, \(\$ 9,000,000\) convertible bonds outstanding all year, convertible into 24 Class A common shares for every \(\$ 1,000\) bond. A bond discount was recorded on issuance, and amortization of \(\$ 19,200\) was recorded on the discount this year. On issuance, \(\$ 145,000\) of common stock conversion rights were recorded in shareholders' equity.

G. \(6 \%, 15\)-year, \(\$ 9,000,000\) convertible bonds outstanding at the beginning of the year, convertible into 20 Class A common shares for every \(\$ 1,000\) bond. A bond discount was recorded when the bond was originally issued, and amortization of \(\$ 2,500\) was recorded on the discount this year. On issuance, \(\$ 145,000\) of common stock conversion rights were recorded in shareholders' equity. The bonds converted into common stock on 1 April of the current year, and basic EPS properly reflects the common shares outstanding since 1 April.

Required:

Indicate whether each of the above times would be included or excluded in a calculation of diluted EPS, and why. The solution should include the individual effect of each item, as applicable. If the item is included, indicate the change to the numerator and denominator of diluted EPS.