· Each bond is convertible into 40 shares of common stock and issued at par.
· The preferred stock is cumulative, each share of preferred stock is convertible into 3 shares of common stock.
· Number of bonds outstanding, preferred shares, and common shares has not changed during 2017.
· Under common stock options, company can purchase 79,600 shares of common stock at $15 per share. These options are granted in prior year.
· Treasury stock balance is zero.
There is no treasury stock. The company also has common stock options (granted in a prior year) to purchase 79,600 shares of common stock at $15 per share.
a. Calculate basic earnings per share
b. Calculate diluted earnings per share