1. At December 31, 2017, Retriever Ltd. had 2,000,000 common shares outstanding. On January 1, 2018, Retriever issued 500,000 non-cumulative preferred shares, which were convertible into 1,000,000 common shares. During 2018, Retriever paid cash dividends of $900,000 to the common shares and $300,000 to the preferred shares. Net income for calendar 2018, was $6,000,000. Assuming an income tax rate of 30%, the diluted earnings per share for 2018 is

a. $1.80.

b. $2.00.

c. $2.80.

d. $3.00.

2. At December 31, 2017, Jack Russell Ltd. had 900,000 common shares outstanding (no preferred shares issued). On September 1, 2018, an additional 300,000 common shares were issued. In addition, Jack Russell had $10,000,000 (par value) 6% convertible bonds outstanding at December 31, 2017, which are convertible into 600,000 common shares. No bonds were converted in 2018. Net income for calendar 2018 was $3,750,000. Assuming the income tax rate is 30%, the diluted earnings per share for 2018 is

a. $2.35.

b. $2.61.

c. $2.72.

d. $3.75.

3. Information concerning the capital structure of Shepherd Corporation follows: December 31,

Common shares outstanding Convertible preferred shares outstanding 9% convertible bonds

2018 100,000 shares 10,000 shares $2,000,000

2017 100,000 shares 10,000 shares $2,000,000

During 2018, Shepherd paid dividends of $1.00 per common share and $2.50 per preferred share. The preferred shares are non-cumulative, and convertible into 20,000 common shares. The 9% convertible bonds are convertible into 50,000 common shares. Net income for calendar 2018 was $500,000. Assume the income tax rate is 30%.

What is the diluted earnings per share for 2018?

a. $4.00.

b. $3.68.

c. $3.54.

d. $2.94.