The following convertible securities will have a dilutive impact on earnings per share:  (1)10% convertible preferred stock with dividends of $7,000 declared during the year and shares convertible into 2,500 common shares(2)6% convertible bonds with interest expense (net of taxes) of $8,000 and convertible into 3,500 common shares(3)8% convertible bonds with interest expense (net of taxes) of $5,000 and convertible into 1,600 common sharesWhat is the appropriate ranking of items 1, 2, and 3 above to indicate their impact on diluted earnings per share calculations from most dilutive to least dilutive?

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Asked Nov 26, 2019
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The following convertible securities will have a dilutive impact on earnings per share: 

 

(1)10% convertible preferred stock with dividends of $7,000 declared during the year and shares convertible into 2,500 common shares(2)6% convertible bonds with interest expense (net of taxes) of $8,000 and convertible into 3,500 common shares(3)8% convertible bonds with interest expense (net of taxes) of $5,000 and convertible into 1,600 common shares

What is the appropriate ranking of items 1, 2, and 3 above to indicate their impact on diluted earnings per share calculations from most dilutive to least dilutive?

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Step 1

Calculation of effect of diluted s...

A
В
C
D
10% convertible
6%
8%
preference stock convertible convertible
7000
2 Stock dividend
8000
3500
ЕС3/С4
3rd
5000
3 Interest expense
4 Converted common stock 2500
1600
=B2/B4
-D3 / D4
5 EPS
2nd
6 Rank
1st
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A В C D 10% convertible 6% 8% preference stock convertible convertible 7000 2 Stock dividend 8000 3500 ЕС3/С4 3rd 5000 3 Interest expense 4 Converted common stock 2500 1600 =B2/B4 -D3 / D4 5 EPS 2nd 6 Rank 1st

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