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Diluted EPS and Convertible Preferred Stock The company had 110,000 shares of common stock outstanding throughout the year. In addition, as of January 1, the

Diluted EPS and Convertible Preferred Stock

The company had 110,000 shares of common stock outstanding throughout the year. In addition, as of January 1, the company had issued 8,000 convertible preferred shares (cumulative, 5%, $100 par). The company has no other potentially dilutive securities. Net income for the year was $400,000. Round the earnings per share to the nearest cent.

Compute diluted earnings per share, assuming that each preferred share was convertible into four shares of common stock.

Compute diluted earnings per share, assuming that each preferred share was convertible into one share of common stock.

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