Dooley Co. had 200,000 shares of common stock, 20,000 shares of convertible preferred stock, and $1,000,000 of 10% convertible bonds outstanding during 2001. The preferred stock is convertible into 40,000 shares of common stock. During 2001, Dooley paid dividends of $1.20 per share on the common stock and $3.00 per share on the preferred stock. Each $1,000 bond is convertible into 45 shares of common stock. The net income for 2001 was $600,000 and the income tax rate 30%.

Basic earnings per share for 2001 is (rounded to nearest penny)

a. $2.50

b. $2.70

c. $2.73

d. $3.00

Diluted earnings per share for 2001 is (rounded to nearest penny)

a. $2.14

b. $2.25

c. $2.35

d. $2.46

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