Answer the following question:

The senior accountant at Mitchell Inc. calculated the companys earnings per share (EPS) for the current year at $2.45 per share. Upon review, the controller discovered that the accountants calculation did not include the 2-for-1 stock that was declared on the common shares in the year.

Which statement correctly describes the effect that this item has on the companys EPS for the current year?

a) Current EPS is correctly stated since the item was correctly incorporated in the calculation

b) Current EPS is understated

c) Current EPS is overstated

d) Item has no impact since it is irrelevant in EPS calculations

e) Impact cannot be determined based on facts provided