1. A company that has convertible bonds outstanding,

a) has a simple capital structure

b) would use the treasury stock method to calculate diluted earnings per share

c) may have potential dilution of earnings per share

d) will always experience dilution of earnings per share upon conversion of the bonds to common stock

2. When calculating dilutive earnings per share, a company that has convertible preferred stock outstanding will

a) add the dividends on the convertible preferred stock to the numerator

b) add the convertible preferred stock dividends, net of their tax effect, to the numerator

c) use the treasury stock method

d) add the number of convertible preferred stock shares to the denominator