On January 1, 2017, Stellar Company issued 10-year, $2,060,000face value,6% bonds, at par. Each $1,000 bond is convertible into16shares of Stellar common stock. Stellar's net income in 2017 was $294,000, and its tax rate was40%. The company had101,000shares of common stock outstanding throughout 2017. None of the bonds were converted in 2017.

How do I

(a)Compute diluted earnings per share for 2017.

(b)Compute diluted earnings per share for 2017, assuming the same facts as above, except that $1,010,000of6% convertible preferred stock was issued instead of the bonds. Each $100 preferred share is convertible into5shares of Stellar common stock.