1. A company with convertible bonds outstanding will assume hypothetical conversion of the bonds into shares of common stock at the earliest point of the year in the computation of diluted EPS. The numerator is

   1. decreased by interest expense on the bonds for the fiscal year.

   2. increased by interest expense on the bonds for the fiscal year.

   3. increased by dividends paid on the bonds during the fiscal year.

   4. decreased by dividends paid on the bonds during the fiscal year

3. Stock options and warrants affect the diluted EPS calculation by changing the

   1. numerator only.

   2. denominator only.

   3. both the numerator and denominator.

   4. neither the numerator and denominator.