1. Requirements: (a) Compute basic earnings per share for the year ended December 31, 2015; (b) Compute diluted earnings per share for the year ended December 31, 2015. 2. Assume the stated preferred stock dividend is $3 per share per year. 3. Assume the "date of record" is one day prior to the "date of payment" for preferred stocks. Thus, the date of record for the preferred stockholders will be on September 29, December 31, March 30 and June 29 to qualify for the quarterly dividend payments.

Stated Prefer Stock Dividend Per Share is $3 Per Year Dividend Payable Quarterly, so there will be 4 Dividend Payment every Year. Every Quarter dividend will be: 3 / 4 = $0.75 Per Share Per Quarter Preference Shares outstanding on 31 March = 700,000 Dividend paid on 31 March = 700,000 x 0.75 = $525,000 On 1st April 400,000 Prefer Share are converted in Equity Share so now for remaining quarters only 300,000 Prefer Shares are Outstanding. Preference Shares outstanding for the next three quarter = 700,000 - 400,000 = 300,000 Remaining Quarters are 3 Every Quarter dividend is 0.75 So, total dividend for 3 Years = 0.75 x 3 = $2.25 Per Prefer Share Dividend for the remaining Quarter = 300,000 x 2.25 (0.75 x 3) = $675,000 Total Dividend for the whole Year on Prefer Share = 525,000 + 675,000 = $1,200,000 This will be deducted from Net Income of $11,550,000 to use net income for basic eps calculation. Stated Prefer Stock Dividend Per Share is $3 Per Year Dividend Payable Quarterly, so there will be 4 Dividend Payment every Year. Every Quarter dividend will be: 3 / 4 = $0.75 Per Share Per Quarter Preference Shares outstanding on 31 March = 700,000 Dividend paid on 31 March = 700,000 x 0.75 = $525,000 On 1st April 400,000 Prefer Share are converted in Equity Share so now for remaining quarters only 300,000 Prefer Shares are Outstanding. Preference Shares outstanding for the next three quarter = 700,000 - 400,000 = 300,000 Remaining Quarters are 3 Every Quarter dividend is 0.75 So, total dividend for 3 Years = 0.75 x 3 = $2.25 Per Prefer Share Dividend for the remaining Quarter = 300,000 x 2.25 (0.75 x 3) = $675,000 Total Dividend for the whole Year on Prefer Share = 525,000 + 675,000 = $1,200,000 This will be deducted from Net Income of $11,550,000 to use net income for basic eps calculation