21. Best Co. has gathered the following information to be used in developing its Earnings Per Share presentation for its annual financial statements dated December 31, YR05. Selected Balance Sheet Financial Information - Liabilities: $200,000 of 6% convertible bonds are outstanding at 12-31-YR05. The bonds were issued at 97 on 6-1-YR05. These bonds are dated 6-1-YR05 and are to be outstanding for 10 years. Interest is payable each year on June 1. Beginning on December 1, YR05 each $1,000 bond is convertible into common stock according to the following schedule. Note: As of 12-31-YR05 none of these bonds have been converted to common stock. Also, for the year ended 1231-YR05 the company recorded $350 of bond discount amortization related to these bonds. Common \$1 dollar par value common stock, 100,000 shares authorized, 30,000 shares issued and outstanding at Stock: 12-31-YR05. The company began the YR05 year with 10,000 shares outstanding. On 4-1-YR05 an additional 5,000 shares were issued for cash. Also, on 10-1-YR05, the company declared a 2 for 1 stock split. Options: A total of 7,200 (Series A) stock options with an exercise price of $3 were outstanding at 12-31-YR05. Upon payment of $3, each option is convertible into one share of common stock. The options were originally issued on 11-1-YR05 and are exercisable between 11-1-YR05 and 12-31-YR10. Note: As of 12-31-YR05 none of these options have been converted to common stock. Preferred $100 par value, 5% preferred stock; 4,000 shares authorized with 2,000 shares issued and outstanding at Stock: 1231 YR05. The preferred stock is cumulative but not participating, and was issued on 9-1-YR02. This issue of preferred stock is not convertible into common stock. Dividends were last declared and paid for the year ended 12-31-YR03. Dividends for YR04 and YR05 have not been declared or paid. Selected average market prices for company securities were: Other Information: For YR05 the company reported a net income of $40,000. In YR05 the income tax rate is 40%. REQUIRED: A. Compute weighted average common shares outstanding for YR05 To avoid carryforward errors, for parts B - G assume your answer in part ' A ' above was 30,000 common shares. B. Compute simple earnings per share for YR05. C. For each convertible security, determine the EPS numerator and denominator effects to be used in calculating diluted EPS for YR05. D. Determine the order in which convertible securities will enter into the computation of diluted EPS. E. Perform and complete the computations necessary to determine diluted earnings per share for YR05. F. For each convertible security, indicate if it would or would not be included in the final calculation of diluted EPS. G. State the EPS amount(s) that will be reported on the YR05 income statement (round to nearest penny)