Whispering Inc. had net income for the current year ending December 31, 2020 of $1,043,070. During the entire year, there were 501,000 common shares outstanding. The company had two classes of preferred shares outstanding: the Class A preferred shares were $2.17 cumulative shares of which 12,000 were outstanding, and were convertible to common shares at a rate of 1:1. There were 107,000 $5.17 Class B non-cumulative preferred shares outstanding that were also convertible at a rate of 1:1. Whispering had outstanding a $1,000,000, 7% bond issued in 2009 that was convertible to 22,000 common shares. The company also had outstanding a $1,000,000, 6% bond issued in 2010 that was convertible to 26,000 common shares. No dividends were declared or paid this year. Whisperings tax rate is 37%.

Calculate the income effect of the dividends on Class A preferred shares.

Dividends on Class A preferred shares

$Enter your answer in accordance to the question statement

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Calculate the income effect of the dividends on Class B preferred shares.

Dividends on Class B preferred shares

$Enter your answer in accordance to the question statement

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Calculate basic earnings per share. (For simplicity, ignore the requirement to record the debt and equity portions of the convertible bond separately.) (Round answer to 2 decimal places, e.g. 15.25.)

Basic earnings per share

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Calculate the after-tax interest paid on the 2009 bonds.

After-tax interest on 2009 bonds converted

$Enter your answer in accordance to the question statement

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Determine an incremental per share effect for 2009 bonds. (Round earnings per share to 3 decimal places, e.g. 15.257.)

Potentially dilutive security		Incremental Numerator Effect		Incremental Denominator Effect		EPS
2009 Bonds		$				$

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Calculate the after-tax interest paid on the 2010 bonds.

After-tax interest on 2010 bonds converted

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Determine an incremental per share effect for 2010 bonds. (Round earnings per share to 3 decimal places, e.g. 15.257.)

Potentially dilutive security		Incremental Numerator Effect		Incremental Denominator Effect		EPS
8% Bonds		$				$

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Determine an incremental per share effect for Class A preferred shares. (Round earnings per share to 2 decimal places, e.g. 15.25.)

Potentially dilutive security		Incremental Numerator Effect		Incremental Denominator Effect		EPS
Class A preferred shares		$				$

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Determine an incremental per share effect for Class B preferred shares. (Round earnings per share to 2 decimal places, e.g. 15.25.)

Potentially dilutive security		Incremental Numerator Effect		Incremental Denominator Effect		EPS
Class B preferred shares		$				$

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Rank the potentially dilutive securities from most dilutive to least dilutive.

2009 bonds		Rank 1Rank 2Rank 3Rank 4Anti-dilutive
2010 bonds		Rank 1Rank 2Rank 3Rank 4Anti-dilutive
Class A preferred shares		Rank 1Rank 2Rank 3Rank 4Anti-dilutive
Class B preferred shares		Rank 1Rank 2Rank 3Rank 4Anti-dilutive

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Calculate diluted earnings per share. (Round calculations of EPS to 3 decimal places, e.g. $3.545 and provide final answer to 2 decimal places, e.g. 15.25.)

		Numerator		Denominator		EPS
Basic		$				$
2009 bonds2010 bondsClass A preferred sharesClass B preferred shares
Sub Total
2009 bonds2010 bondsClass A preferred sharesClass B preferred shares
Sub Total
2009 bonds2010 bondsClass A preferred sharesClass B preferred shares
		$				$

Diluted EPS

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