Computing Diluted EPS: Convertible Bonds and Convertible Preferred Stock

Jones Corporation's capital structure follows.

December 31	2020
Outstanding shares of stock
Common stock, outstanding shares	220,000
Convertible preferred stock, outstanding shares	20,000
8% Convertible bonds	$2,000,000

During 2020, Jones declared and paid dividends of $3.00 per share on its preferred stock. The preferred shares are convertible in 40,000 shares of common stock. The 8% bonds are convertible into 60,000 shares of common stock. Net income for 2020 is $1,615,000. Assume that the income tax rate is 25%.

Required

a. Compute basic EPS for 2020.

b. Compute diluted EPS for 2020.