During 2009, M Co

question 102

Multiple Choice

During 2009, M Co. had the following two classes of stock issued and outstanding for the entire year:  400,000 shares of common stock, $1 par.
 2,000 shares of 4% preferred stock, $100 par, convertible share for share into common stock.
M's 2009 net income was $1,800,000, and its income tax rate for the year was 30%. In the computation of diluted earnings per share for 2009, the amount to be used in the numerator is

• A)$1,792,000.
• B)$1,796,000.
• C)$1,800,000.
• D)$1,802,400.The "if converted method" assumes that the preferred stock was converted to common stock and that preferred dividends were not distributed.Therefore, the numerator in the computation of Diluted EPS would be the net income of $1,800,000.

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